This Country Offers 50 Year Mortgage, Many Residents Interested in My Money – 2 days ago

Jakarta, CNBC Indonesia– Banking in South Korea last July launched a mortgage loan product in the form of Home Ownership Loans (KPR) with a term of 50 years. Loan disbursements swelled up in just over a month, but this raised concerns about the country’s worsening household debt situation.

According to the financial industry, the accumulated balance of 50-year mortgages held by KB Kookmin Bank, Shinhan Bank, Hana Bank, and NH NongHyup Bank reached 1.28 trillion won or US$960 million as of Thursday. NH NongHyup Bank was the first among the major local banks to introduce a 50 year mortgage product on July 5.

NongHyup’s move was followed by Hana Bank, KB Kookmin, and Shinhan Bank, and Woori Bank, which also began offering mortgages with a term of 50 years.

The Korean Times reported that the total weight of loans with a maturity of 50 years from all balances of state mortgage loans by the banking sector was said to be still very small. However, bearing in mind that only about a month have mortgages with a maturity of 50 years been issued, loan balances are expected to continue to increase.

The financial authorities are currently considering setting an age limit for mortgages of 50 years. This step aims to reduce the size of household debt or the main risk factor for South Korea’s economy.

Government officials attribute the introduction of 50-year mortgages as the main reason for the recent rise in household debt. Where on Sunday, the total balance of household debt by five major local banks, namely KB Kookmin, Shinhan, Hana, Woori, and NH NongHYup, reached 679.8 trillion won, an increase of 668.5 billion won from the end of last month.

Although it has not been confirmed, it is likely that financial authorities will soon advise lenders to impose an age limit on borrowers, so that only those under 34 years of age are eligible for loans with a maturity of 50 years.

However, some consumers expressed dissatisfaction with the government’s directive. One resident revealed the reason for his dissatisfaction online.

“KPR loans mean that the house is used as collateral. Then why should it be limited only to young people?” he wrote, quoted on Sunday (13/8/2023).

Another netizen added that mortgage loans with such a long maturity could help some households who want to buy their own house.

“Age should be at least 45 or over; 34 years sounds too arbitrary,” he wrote.

Some bankers point to the fact that the rollout of 50 year maturity loans by banks was initially aimed at following the government’s policy direction. Mainly to reduce the borrower’s burden in repaying the loan principal.

It was also in line with the government’s move to ease lending restrictions earlier this year to ease the real estate market. They said the financial authorities’ move to curb mortgage lending with 50-year maturities appeared to be blaming banks for systematic problems such as household debt or real estate slumps.

[Gambas:Video CNBC]

(hsy/hsy)