Buyers flock to sub-W1.5b apartments as loan cap stays unchanged

Choi, a 39-year-old office worker living in Hanam, Gyeonggi Province, has been weighing a move to Seoul with his child's elementary school enrollment about two years away. Loan regulations, however, have made the search difficult. Options priced below 1.5 billion won ($1.06 million) tend to be standalone buildings or located far from schools, leaving him with few viable choices. "I had hoped this round of measures would ease lending restrictions at least a little for genuine homebuyers, but in the end nothing changed," he said. "It's exhausting to just keep waiting — it feels like ordinary people are being told to look only at apartments under 1.5 billion won."

Frustration is mounting among prospective homebuyers after the latest real estate package again left the 600 million won mortgage cap in place for apartments priced at or below 1.5 billion won. While the overall household lending supply has been expanded, critics note that individual borrowing limits remain unchanged, keeping the burden of homeownership heavy. There are also growing concerns that the additional lending capacity could flow into sub-1.5 billion won apartments and push up prices in that segment.

According to financial industry sources, the government raised its annual household lending growth target from 1.5 percent to around 3 percent as part of its real estate package announced Thursday. The adjustment reflects an upward revision to the nominal growth rate forecast since the original target was set, as well as rising demand for settlement loans and relocation financing tied to increased housing transactions.

The government kept in place the regulations that most directly determine how much housing individual borrowers can actually afford. Under current rules for the Greater Seoul area and designated regulated zones, the mortgage cap stands at 600 million won for homes priced at or below 1.5 billion won, 400 million won for homes between 1.5 billion and 2.5 billion won, and 200 million won for homes above 2.5 billion won. Loan-to-value ratio and debt service ratio limits also remain unchanged.

Financial Services Commission Chairman Lee Eok-won said at a briefing Thursday that the adjustment was "a rational recalibration of the household lending volume management target," adding that it did not signal a loosening of the overall lending stance. "This does not mean we are shaking the framework of LTV, DSR, the 600 million won lending cap, or the tiered limits of 600, 400 and 200 million won based on home price," he said.

In effect, while the total volume of loans banks can extend has grown, the maximum amount any individual homebuyer can borrow has not changed. The 600 million won cap on homes priced at or below 1.5 billion won is a particularly heavy burden for genuine buyers at a time when home prices in Seoul and the broader metropolitan area have risen. For a 1.4 billion won apartment, a buyer who meets all other lending requirements is still limited to a 600 million won mortgage, meaning the remaining 800 million won must come from personal funds.

Financial industry insiders say the expanded lending ceiling is unlikely to translate into immediate relief for individual borrowers. "The increase in the household lending growth target is a positive development in itself, but recent growth in household lending has been driven more by unsecured credit loans than by mortgages, so it is unlikely to lead to an immediate easing of mortgage regulations," one industry official said. "The priority will likely be to secure lending capacity for genuine homebuyers first, then manage things flexibly while monitoring housing market and household lending trends."

Another concern among prospective buyers is that the expanded lending capacity could concentrate demand in apartments priced below 1.5 billion won. With per-home borrowing limits left unchanged, a larger overall lending pool could draw buyers toward the sub-1.5 billion won segment, where financing conditions are comparatively more favorable. Online real estate communities have already raised the alarm, with users asking whether apartment prices below 1.5 billion won will be the first to surge following the lending expansion, and suggesting the government has effectively signaled that buyers should target that price range.

Some voices are now calling for separate lending standards to be applied to genuine homebuyers — such as first-time purchasers and young adults — even if the broader regulatory framework aimed at curbing speculative demand is kept in place.

Ko Jong-wan, head of the Korea Asset Management Research Institute, said lending restrictions to deter speculative buying are necessary, but applying them uniformly to clear-cut cases of genuine need — such as first-time buyers and young adults — warrants reconsideration. "There is a need to apply more flexible standards to genuine homebuyers, factoring in future income and similar considerations," he said.