Mortgage Rate Reduction Policy Overview
In August 2024, the government announced the Mortgage Rate Reduction Policy.
The policy aims to reduce household interest burdens, stabilize the housing market, and encourage home purchases, applying to both fixed-rate and variable-rate loans.
Below, we summarize the policy background, eligibility, rate reduction levels, application procedure, and expected effects.
Table of Contents
- Policy Background and Objectives
- Eligibility and Rate Reduction Details
- Application Procedure
- Expected Effects
- FAQ
- References and Related Links
Policy Background and Objectives
- Announcement Date: August 10, 2024
- Issuing Agencies: Financial Services Commission, Ministry of Land, Infrastructure and Transport, participating banks
- Key Objectives:
- Reduce household interest burden caused by rapid interest rate hikes
- Stabilize the housing market and encourage transactions
- Improve long-term housing finance conditions
Due to recent interest rate increases, middle-class households and newlyweds faced greater difficulty in purchasing homes. The government introduced this policy to alleviate these burdens.
Eligibility and Rate Reduction Details
| Category | Details |
|---|---|
| Eligible Borrowers | Existing mortgage holders and new loan applicants |
| Applicable Rates | Fixed-rate and variable-rate loans |
| Reduction Level | Average reduction of 0.5–1.0 percentage points from existing rates |
| Application Limit | Primarily applies to homes with outstanding loans up to KRW 500 million and one-household, one-property basis |
| Loan Term | Maintains original loan contract terms; some long-term installment adjustments possible |
This policy is expected to reduce monthly repayments for borrowers and contribute to overall housing market stability.
Application Procedure
- Bank Visit or Online Application: Choose the existing or a new lending bank
- Submit Required Documents: Identification, existing loan documents, income verification
- Rate Adjustment Confirmation: Bank recalculates interest rate and monthly repayment
- Policy Applied: Monthly repayment amount decreases after loan contract adjustment
Expected Effects
- Reduced Household Interest Burden: Lower monthly repayments help stabilize household finances
- Housing Market Stabilization: Reduced interest costs may encourage home transactions
- Improved Housing Welfare: Supports home purchases for eligible borrowers
- Strengthened Financial Market Confidence: Collaboration between government and banks maximizes policy impact
FAQ
Q1. Can existing borrowers benefit from the rate reduction?
Yes, existing mortgage holders can apply through their banks to receive the rate reduction.
Q2. What is the application limit for the rate reduction?
Primarily applies to homes with outstanding loans up to KRW 500 million and one-household, one-property basis.
Q3. Does it apply to both fixed-rate and variable-rate loans?
Yes, the policy applies to both fixed-rate and variable-rate mortgages.
Q4. How much can monthly repayments decrease?
Depending on loan amount and terms, a 0.5–1.0 percentage point reduction may reduce monthly payments by approximately 10–20%.
References and Related Links
- Financial Services Commission Press Release
- Ministry of Land, Infrastructure and Transport Housing Policy
- Korea Housing Finance Corporation Guidance