Bank loans for rent payments in March increased 40 percent from the same period a year ago, data showed Friday, likely a side effect from the tightening of mortgages.
Rent loans by the country's five leading commercial banks measured 50.77 trillion won ($47.8 billion) at end-March, up 3.61 percent from the previous month. The total is a jump of 40.99 percent from the same month last year. Comparatively, loans for rent came to 25.66 trillion won in March 2016 and rose to 30 trillion won in August the same year. They gained further to over 40 trillion won in August 2017.
Such loans rose visibly in the first quarter this year, adding 5.78 trillion won during the three months, an exceptional increase since quarterly gains hadn't exceeded 4 trillion won in the past.
(Yonhap)
Property market watchers point to repeated government action to bring mortgages under control, turning rent loans into an alternative to mortgages that have become harder to access.
Policymakers pulled in the reins last year on debt-to-income and loan-to-value ratios in extending mortgages to prevent households from spreading themselves thin with heavy loan repayments. They went further in January to introduce the debt service ratio, which takes into account not just home mortgages but all debt principal and interest payments in proportion to yearly income when extending loans.
Market watchers, however, say rent loans have escaped the tightening policy. While the current LTV rule allows mortgages of 40 percent of home value, rent loans are allowed up to 80 percent.
While DSR for mortgage counts all debts and interest payments, that for rent loans reflects only interest payments. (Yonhap)