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S. Korean Ministry May Ease Rule on Mortgages
Source: koreaherald.com
Source Date: Friday, July 23, 2010
Focus: Knowledge Management in Government
Country: Korea (Republic of)
Created: Jul 25, 2010

The government is reportedly studying ways to increase exceptions to the debt-to-income rule, instead of easing the level of the financial restriction on home buyers, reports said on Friday.

“Even though there are many who criticize that the level of current mortgage regulations is high, the DTI rule is supposed to keep the country’s economy healthy by capping the increase of household debt,” a senior official at the Ministry of Strategy and Finance was quoted by Yonhap news agency as saying.

“Relaxing the rule will produce more loss than profit at this moment,” he added.

The comment comes after the government delayed announcing measures to stimulate the sluggish property market on Wednesday. Policymakers seem to have failed to narrow their differences over whether to ease mortgage lending restrictions.

Instead, officials are widely expected to settle on a partial easing of the debt-to-income ratio rule, a key mortgage lending criteria which restricts a portion of homebuyers’ income in proportion to their loan payments.

Currently, homebuyers cannot borrow more than 40 percent of their annual income in bank mortgages if they were to purchase an apartment unit valued at more than 600 million won ($495,000) located in government-designated speculation-watch zone. The limit is 50 percent for the rest of Seoul and 60 percent for the greater Seoul metropolitan and Gyeonggi Province.

Finance Minister Yoon Jeung-hyun has also been expressing his opposition toward calls urging the government to relax the DTI rules.

The minister said it was not appropriate to ease the rule to boost the real estate and construction market at a time when increasing household debt was becoming a problem.
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