Lee Jae-myung, the President, attended the Chief Secretary’s Meeting held at the Blue House on the 12th and took his seat. (Photo = Newsis)
Meanwhile, the financial authorities are considering applying stricter criteria for extending loans to landlords, amid a review of the practice of ‘loan extensions’ for multiple homeowners.
Specifically, the reapplication of the Rental Income to Interest (RTI) ratio not only at the initial loan stage but also upon extensions is being strongly discussed.
According to the financial authorities today (18th), the Financial Services Commission plans to convene a meeting tomorrow (19th) afternoon with executive officers and staff from corporate financing departments across all financial sectors, including the five major banks.
Although a comprehensive financial sector inspection meeting was already held on the 13th, another meeting is being convened immediately after the holiday to assess the current situation more specifically and discuss countermeasures.
In particular, they plan to closely examine the re-assessment process during loan extensions for rental property operators who own multiple homes.
Unlike personal housing mortgage loans, which have a long-term installment structure, rental business loans typically are initiated with an initial term of 3-5 years and commonly extend annually.
This aligns with President Lee Jae-myung’s comment on his social media on the 13th: “Is it fair to give a loan extension to multiple homeowners who haven’t resolved their holdings despite having had years to do so when the loan matures?” Many interpret this remark as targeting landlords’ loans rather than individual housing mortgage loans.
As of the end of last year, out of the 157 trillion won in bank loans to the real estate rental sector, the residential rental business loan, excluding commercial use, is estimated to be 13.9 trillion won.
The Financial Services Commission is specifically considering strictly applying RTI regulations during maturity extension assessments.
The RTI is an indicator calculated by dividing a landlord’s annual rental income by their annual interest expenses, requiring at least 1.5 times in regulated areas and 1.25 times in non-regulated areas for loan eligibility.
For example, if a rental business operator’s annual interest expense is 10 million won in a regulated area, their rental income must be at least 15 million won annually to initially qualify for a rental business loan from a bank.
However, it is known that such strict RTI assessments have not traditionally been enforced by banks during loan extensions.
A Financial Services Commission official explained, “We aim to thoroughly identify the loan status and review procedures with an awareness of the issue,” adding that “since procedures may vary across banks, we will first gather diverse viewpoints.”