Korea Housing Finance Corporation is raising the interest rate surcharge on Bogeumjari loans for properties in regulated areas from 0.1 percentage points to 0.2 percentage points as early as the end of this month, according to financial industry sources on the 20th. The measure aims to prevent a balloon effect from the policy loans, which carry rates approximately 2 percentage points lower than commercial bank mortgage rates, amid surging household debt. KHFC first introduced a 0.1 percentage point surcharge for regulated areas in May, and is now doubling the surcharge after continued strong demand for the government-backed housing loans.
KHFC Applies 0.2%p Surcharge to Seoul and 12 Gyeonggi Regions
The 0.2 percentage point surcharge will apply to Bogeumjari loans secured by properties in all of Seoul and 12 Gyeonggi areas: Gwacheon, Gwangmyeong, Seongnam's Bundang/Sujeong/Jungwon districts, Suwon's Yeongtong/Jangan/Paldal districts, Anyang's Dongan district, Yongin's Suji district, Uiwang, and Hanam. Bogeumjari loans are policy financial products targeting households with combined annual income of 70 million won or less and housing valued at 600 million won or less. Following market interest rate increases this month, Bogeumjari loan rates rose 0.3 percentage points, with the 10-year Akkim e-Bogeumjari loan currently at 4.90% and the 50-year loan at 5.20%.
Bogeumjari Loan Volume Reaches 11.3 Trillion Won Through May
Bogeumjari loans totaled approximately 11.3 trillion won through May on a cumulative annual basis. Considering that the previous year's annual volume was 19 trillion won, the current pace represents a significant acceleration. The annual supply target for Bogeumjari loans is 20 trillion won. Loan volume has gradually decreased as Bogeumjari rates rose from 4% to 4.3% at the beginning of the year to 4.7% to 5% in May. A KHFC official stated that the corporation is reviewing the surcharge increase in regulated areas to prioritize providing loans to borrowers who need support within the limited supply target.
KHFC Restricts Living Stability Fund Usage for Non-Capital Area Properties
KHFC will also restrict Bogeumjari loans for living stability fund purposes. Previously, borrowers could obtain Bogeumjari loans for living stability purposes if the collateral property was located outside the capital region, but KHFC will suspend such usage for non-capital region properties by the end of this year. After the restriction, Bogeumjari loans for living stability purposes will only be available for rental deposit returns, inheritance or gift acquisitions, and cases where the debtor is a small business owner. Despite the financial sector's continued household debt reduction policies, loan demand has not decreased easily, with many borrowers turning to policy funds as commercial banks limit mortgage lending volumes.
FAQ
What is the new interest rate surcharge for Bogeumjari loans in regulated areas?
Korea Housing Finance Corporation is raising the surcharge from 0.1 percentage points to 0.2 percentage points as early as the end of this month for properties in Seoul and 12 Gyeonggi areas including Gwacheon, Gwangmyeong, parts of Seongnam, Suwon, Anyang, Yongin, Uiwang, and Hanam.
Who is eligible for Bogeumjari loans?
Bogeumjari loans are available to households with combined annual income of 70 million won or less purchasing housing valued at 600 million won or less, with current rates at 4.90% for 10-year terms and 5.20% for 50-year terms.
What restrictions is KHFC placing on living stability fund usage?
KHFC will suspend Bogeumjari loans for living stability purposes on non-capital region properties by the end of this year, limiting such loans to rental deposit returns, inheritance or gift acquisitions, and small business owner cases only.
