Mortgage Borrowers Spend 12.7% of Monthly Income on Mortgage Payment

- Half of them are feeling the pinch of making repayments on their mortgage

ㅇ A recent study reveals that households with mortgage debt spend an average of 12.7% of their monthly income on making mortgage repayments.   
ㅇ Over half of them are found to feel pressured by the amount of their monthly mortgage repayments.
ㅇ It is also expected that home loans through digital lenders will become increasingly available.  

Korea Housing Finance Corporation (HF, CEO Lee Jung-Hwan) announced on January 30, 2018, that its recent study conducted jointly with a polling agency revealed the above findings. The study, entitled 'Housing Finance and Bogeumjari Loan Survey,' was carried out to assess the current status of the use of housing finance products by the public. The study was conducted on 5,043 ordinary households (headed by persons aged 20 and older and selected from across the nation) and 2,000 households with a Bogeumjari loan from August 23 to November 1, 2017.  
 
Over half of mortgage borrowers feel the strain of making repayments

According to the study, 52.0% of the 1,266 households with mortgage loans feel pressured by the amount of their monthly mortgage repayments. By income group, the share of those feeling the pinch was the highest (58.9%) among mortgage-borrowing households with less than KRW 2 million in monthly income. By product, the share of those feeling repayment burden was ▲ 55.6% among those with mortgage loans offered by commercial banks and ▲ 34.0% among those with an HF Bogeumjari loan. This shows that state-guaranteed Bogeumjari loan users feel less repayment burden than other home loan borrowers. By region, the percentage of those feeling the burden of repayment was the highest in metropolitan areas (59.0%), followed by ▲ Gyeonggi-do (52.7%), ▲ other provinces (51.8%), and ▲ Seoul (38.6%).
  
In addition, the monthly average mortgage repayment to income ratio was 12.7%. By region, the figure was ▲ 15.9% in Seoul, ▲ 12.5% in provinces other than Gyeonggi-do, ▲ 12.4% in metropolitan areas, and ▲ 11.4% in Gyeonggi-do.

Two out of every 10 households with home loans say they have no other means of paying off the loans when under financial stress 

Asked about how they will pay off their debt if they face a sudden change in their financial status, such as job loss, more than 20% of households with home loans responded ▲“I don't know/We'll see what will happen if that happens.？？ (20.8%). Of the respondents, ▲ 18.1% said that they will sell the property mortgaged, while ▲ 17.3% said that they will take out another loan from another financial institution. Only a third of households with home loans said they have other means to make repayments. Specifically, ▲ 12.3% of them said that they will early terminate their insurance, pension, or savings schemes. Another ▲ 10.8% responded that they will have no particular difficulty because they hold some free money. Additionally, ▲ 3.5% said that they can afford debt repayment for some time because their loan is a non-recourse one. Finally, ▲ 0.7% said that they will take out a reverse mortgage loan (JTYK) to make repayments.

Home loans through digital banking are expected to become more available

Of 841 households willing to take out a mortgage loan, 30.8% said that digital banking agencies will outshine conventional banking institutions in the home loan market. Asked why they are going to use digital banking agencies, ▲ 44.6% mentioned lower interest rates and service charges, ▲ 19.2% said a simplified loan application procedure, and ▲ 15.1% stated that digital banking is more convenient because it works without visiting a bank in person.  

Furthermore, when asked about the appropriate gap in interest rates between conventional home loan products offered by commercial banks and digital home loan products, over 50% of not only households willing to take out a home loan but also those willing to take out a Jeonse loan responded that the gap should be 0.6 percentage points or more.

90% of households on Jeonse say that they are willing to buy a home when the Jeonse fee reaches 80% of the property's sales price
 

According to a survey on 562 households currently on Jeonse and considering buying a home, their willingness to purchase a home increases significantly when their Jeonse fee hovers around 70% of the sales price of the leased property. Especially when the fee goes up to 80% of the property's sales price, ▲ 93.3% of those in Seoul said they will buy a home, followed by ▲ those in Gyeonggi-do (87.3%), ▲ those in metropolitan areas (88.5%), and ▲ those in other provinces (70.9%).

One out of every three households is willing to purchase a home in the future
  

Of 5,043 ordinary households, 31.9% (or 1,607) said that they are willing to buy a home in the future. By age group, the percentage was the highest among households headed by those in their 30s and under (55.5%). It is also indicated that 51.4% of households without a home are willing to buy a home in the future. 

The average price at which they wish to purchase a home was KRW 283.57 million. Of the respondents, ▲ 39.8% stated their desirable purchase price is KRW 300 million to less than KRW 600 million. Additionally, ▲ 32.0% said that they are willing to purchase a home when its price is set at KRW 200 million to less than KRW 300 million.