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Korea's new economic team to ease housing loan regulations Updated: 2014-07-16 06:27:55 KST

Korea's new economic team, which will be led by incoming finance minister Choi Kyung-hwan, has one goal -- to spur growth.
To achieve it, the team is expected to first fiddle with the nation's real estate market.
Officials at the finance ministry say a set of economic policies for the second half of this year is expected to include measures like easing loan-to-value ratio limits for mortgage lending to 70 percent.
That means home buyers would be able to borrow up to 140-thousand U.S. dollars when buying a house worth 200-thousand dollars.
The current loan-to-value ratio stands at 50 percent for those living in the nation's capital area, which allows them to borrow just 100-thousand dollars when purchasing the same house.
Home buyers who are short of cash typically are forced to borrow money from non-banking financial institutions that charge them higher interest rates.
Economic policymakers expect people moving their loans from non-banking lenders to banks to spend more, which would also lead to pulling the country out of its sluggish domestic demand trap.
While many are concerned that easing housing loan regulations could lead to more household debt, which already hovers around 980 billion dollars, the nation's real estate market is welcoming the government's expected move.

"Easing regulations won't really lead to more household debt because there aren't a lot of speculative investments in the real estate market these days."
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Economists still add that the government should also set up countermeasures to address the side-effects that could occur from easing housing loan regulations.
Hwang Ji-hye, Arirang News.


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