Pre-sale buyers relieved as balance loan limits ease, but existing homebuyers cry foul

Banks have been opening their doors one after another to pre-sale homebuyers facing balance payment deadlines, responding to a request from financial regulators to ease the burden on end-users — but the move has drawn a mixed reaction from the market. While buyers who had been on the verge of a cash crunch are breathing a sigh of relief, existing homebuyers are voicing frustration, calling the preferential treatment for pre-sale buyers "reverse discrimination." Their argument: they too face the same credit squeeze, even though they planned their purchases within the bounds of government regulations.

The Financial Services Commission has signaled it will provide targeted support for end-users — including young buyers, newlyweds and first-time homeowners — but the gap in interpretation over who qualifies as an end-user, and how far that support should extend, is expected to be considerable.

According to financial industry sources, a recent public forum on real estate policy proved to be the decisive catalyst behind major banks allocating additional balance loan limits for Maegyo Station Pallucid, a housing complex in Suwon, Gyeonggi Province.

At the forum, a prospective resident pleaded that aggregate household loan caps had blocked her balance loan, leaving her on the verge of abandoning her contract. President Lee Jae Myung expressed sympathy for buyers who had already signed binding pre-sale contracts and directed financial authorities to draw up remedial measures.

In response, the FSC asked banks to manage balance loans more flexibly, and major banks have each allocated — or are reviewing the allocation of — additional loan limits of around 100 billion won ($69.4 million). Pre-sale buyers who had been saddled with overdue interest or faced the prospect of losing their move-in rights due to an inability to pay their balance have now found some immediate relief.

Existing homebuyers, however, cannot hide their bitterness. They say they fully understand the policy rationale for easing the cash crunch for pre-sale buyers, but feel they have been effectively left behind despite facing the same credit squeeze. They are calling for a relaxation of aggregate loan caps so that anyone can borrow up to the limit of their repayment capacity.

Pre-sale buyers are protected by transitional provisions that lock in the loan terms advertised in the original pre-sale announcement, even if regulations tighten by the time they move in. This means they effectively enjoy more favorable limits and conditions than existing homebuyers, who are subject to current rules.

On top of that, when aggregate loan management shut the door on lending, authorities stepped in directly to ease the bottleneck for pre-sale buyers — while existing homebuyers operating under tightened loan regulations continue to be turned away at bank counters.

There is broad agreement that buyers who decided to purchase a home even as regulations were tightening must accept some personal responsibility. But their plea is that, at a minimum, anyone who stays within government regulations should be able to borrow in line with their repayment capacity.

A man in his 40s, surnamed Han, who sold his previous home and signed a new purchase contract earlier this month, said he had been told at the time of his land transaction permit application that the loan he needed would be available — only to be told by his bank that it was now uncertain. "I understand the intent behind loan restrictions to curb rising home prices," he said, "but banks have been quietly cutting limits without any notice, and now I'm worried about whether I'll be able to make my balance payment on time — or whether I'll lose my deposit and down payment and end up out on the street."

Financial authorities are understood to be internally aware of the equity controversy. At a recent vice president-level meeting of the five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — regulators reportedly urged participants not to disclose specific details of balance loan support to the public. They also asked banks to take particular care to prevent complaints raising the equity issue from surfacing.

Experts broadly welcomed the financial authorities' move to ease balance loan restrictions, saying it reduces harm to end-users who had already committed to buying a home before the regulations were announced, and helps address exceptional situations that policymakers failed to anticipate at the design stage.

However, they cautioned that the current review should not remain a one-off remedy for a handful of cases, and that any easing measures should be extended to all borrowers in similar situations. If preferential treatment is concentrated on a specific category of buyers, it risks stoking an equity controversy within the lending market and undermining the consistency of policy overall.

Woo Seok-jin, a professor of economics at Myongji University, said that even if real estate regulations are applied differently by region, "horizontal equity — the principle that like cases should be treated alike — must be upheld." He added that rather than unlocking balance loans only for select cases, authorities need to take additional steps to allow balance loans for all borrowers in comparable situations.

Financial authorities plan to maintain their existing stance on aggregate loan caps while using targeted support to address the difficulties faced by ordinary citizens, young buyers and other end-users. How to define and scope that support remains the key outstanding question.

Experts are also calling for rigorous verification mechanisms to determine actual residency as part of any balance loan easing process. Kim Sang-bong, a professor of economics at Hansung University, said that even for group loans, confirming whether pre-sale contract holders actually live in the units is essential to keeping out speculators — which was the original intent behind the government's real estate policy.