• 03 / 29 / 2015
  • Government's Housing Mortgage Refinancing Program

  • Mortgage Refinancing Program
    FSC Chairman Yim Jong-yong
    March 29, 2015
    Today’s briefing is about the government’s refinancing program launched on March 24.
    The program was launched in a bid to improve the structure of Korea’s household debt structure
    by shifting floating-rate and interest only payment mortgage loans,
    which take up a significant proportion of bank loans,
    into fixed-rate and amortized loans.
    In other words, the main goal is to enable households to pay back debt
    without contributing to the increase of total household debt volume
    and to minimize risks accompanied by interest rate change.
    The initial 20 trillion won worth of loans were almost sold out
    on the fourth day since the launch.
    According to the statistics, households with annual income of
    less than or equal to 60 million won account for 70%,
    and those with collateral worth more than 600 million won only take up 10%.
    We are estimating that most of the demand came from mid to low income households.
    I truly feel sorry for those who weren’t able to get their loan refinanced
    due to unexpectedly concentrated demand,
    and I would like to thank all bank employees
    who have been working until late at night for the last couple days.
    I realized that the unexceptionally high demand for the refinancing program
    reflects the gravity of household debt problem.
    Moreover, I witnessed how much people are desperate
    to reduce future risks by restructuring their loans.
    I believe it is time for the government to set to improve household debt structure
    considering the uncertainty in the global interest rate trend.
    To such end, the FSC, MOSF, FSS, BoK, and KHFC decided
    to provide an additional 20 trillion won for the program.
    However, we would like to make ourselves clear that
    there will be no further injection of funding to expand the program
    since this time’s additional 20 trillion won is the maximum amount
    that the KHFC can afford given its capital capacity.
    Eligibility and qualifications for the program are the same.
    The additional 20 trillion won will be provided to refinance floating-rate, interest-only loans.
    This time, we came up with measures to respond to possible customer inconvenience
    and other hardships for bank employees.
    Banks will receive applications for the five working days from March 30 to April 3.
    All 20 trillion won will be used up.
    If the total value of application exceeds 20 trillion won,
    borrowers with lower-price houses will be given a priority.
    The reason for this is to give preference to low income classes
    and to minimize disorder and inconvenience
    For those of you who are willing to get your loan refinanced,
    please take advantage of this chance.
    But, before doing that, please consider carefully about your debt repayment ability
    since you must pay back the principal and interest at the same time
    once you get your loan refinanced.
    The FSC, FSS, KHFC, banks, and other related organizations will do our best to minimize inconvenience.
    I know there are demands for expanding the eligibility
    to those with fixed-rate mortgages repaying the principal.
    However, that doesn’t serve our purpose
    because the program is not to merely lower interest rate burdens
    but to improve the quality of household debt
    by switching floating-rate, interest-only mortgage loans.
    We also reviewed whether to expand this program to non-banking institutions.
    We decided not to because it is difficult to devise a unified refinancing product
    as interest rates and collateral values of mortgages vary
    depending on non-banking financial institutions.
    We feel sorry for those who are not qualified for the program
    and we will do our best to help them to switch to the existing other refinancing products.
    We believe the total 40 trillion won worth of mortgage refinancing program
    will significantly contribute in improving the structural vulnerability of household debt.
    Moreover, it is also expected to reduce total household debt volume by 1.1 trillion per year
    as borrowers would start to repay the principal and interest together
    once the 40 trillion won is all used up.
    Furthermore, we think that the program will encourage financial practices of
    paying back principal and interest at the same time in case of housing mortgage loans.
    Of course, the program alone cannot solve the household debt problem.
    We will fine tune and reinforce our efforts through close coordination with the relevant organizations
    and by thoroughly monitoring the household debt trend.
    Even after this time’s additional provision of 20 trillion won,
    the government will focus our policy efforts in resolving financially-marginalized people’s debt program.
    We will expand diverse microcredit loans and programs
    targeting low-income households, students, young entrepreneurs, and aged population.
    In particular, we will expand financial support to reduce housing expanses for low income earners.
    Moreover, we will establish one-stop financial support system
    by launching Microfinance Agency as soon as possible.
    Once again, I thank you for your keen interest in the government’s mortgage refinancing program.
    We promise that we will be even more committed in responding to household debt program
    and improving microfinancial support.
    Thank you.

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