South Korean Authorities to Ease Loan Regulations for Landlords

South Korea's financial regulator announced on July 26 that it will relax loan regulations for homeowners who are having difficulty repaying "jeonse" deposits to tenants for a year.

Jeonse is a unique house-renting scheme in South Korea in which tenants put down a deposit of up to 70% of the home's value and then go two years without paying rent until the landlord returns the full amount.

According to the Financial Services Commission, the relaxed regulations mean that a 60% debt-to-income (DTI) ratio will replace the current 40% DSR restriction, while the rent-to-income (RTI) ratio will be reduced to 100% from the current 125-150%).

The temporary measure comes as a sharp downturn in South Korean home prices over the year has led to a rise in troubled homeowners failing to pay tenants their deposits, creating financial market concerns and worries about the social impact.

The measures are intended to minimise market shocks and authorities will ensure they do not result in side effects such as a rise in household debt, the commission said in a statement.