HF Expands Jeonse Loan Guarantees for Vulnerable Groups for 2020

- It provides youth, newlywed couples, those on credit rehabilitation programs, and other financially vulnerable groups with KRW 9.2 trillion, a 2.5x increase from last year

Korea Housing Finance Corporation (HF, CEO Lee Jung-Hwan) said on the 15th that this year it has provided KRW 9.2 trillion of jeonse loan guarantees for financially vulnerable groups through November, helping reduce a total of KRW 64.7 billion in housing costs.

As part of its efforts to ensure housing stability for socially disadvantaged groups in financial distress due to the COVID-19 crisis, HF has raised ▲ the minimum jeonse and monthly rent loan guarantee amount for young adults (KRW 1.1 trillion in total → KRW 4.1 trillion in total) and has offered ▲ lower interest rates and preferential guarantee fee rates by signing an MOU with local government and financial institutions. All this has led to a significant increase in its total guarantee amount through November from last year. More specifically, the amount has increased by 150% from last year’s KRW 3.7 trillion to KRW 9.2 trillion through this November. 

In particular, it extended KRW 2.6 trillion of youth-oriented jeonse loan guarantees to 50,000 young adults. As of this November, the total volume of the guarantees has grown by 375% year-on-year to reach KRW 2.6 trillion, which went to 50,000 households. This jeonse loan guarantee product is available to non-homeowning young people aged 34 years or younger. With a maximum guarantee amount of KRW 70 million, it carries an annual interest rate in the range of 2%. A close look at its users shows that on average, young people seeking a job or starting their career with an annual income of KRW 30 million or less have taken out KRW 50 million in guaranteed loans. 

HF also offered jeonse loan guarantees through its arrangement with local governments. Based on this arrangement, as of this November, it has provided 30,000 households with KRW 3.4 trillion in jeonse loan guarantees, a 147% increase from the previous year. With the interest subsidy provided by their local government, newlywed couples and young people are found to take out KRW 130 million in guaranteed loans at an annual interest rate of 1.4%.  HF calculates that this guarantee product helps them reduce their interest costs by KRW 130,000 each month compared to ordinary jeonse loan guarantees.

In addition, HF has provided a total of KRW 2.8 trillion in jeonse loan guarantees via a special arrangement with financial institutions. In particular, the total of these jeonse loan guarantees amounted to KRW 2.8 trillion through this November, an 84% rise from a year earlier. These guarantees were provided to 20,000 households. Under the arrangement, financial institutions offer jeonse loans at a discounted interest rate, while HF guarantees the loans. They were taken out mostly by newlywed couples and families with multiple children. 

Furthermore, HF offers special priority jeonse loan guarantees solely for those applying for credit restoration or on a government-sponsored low-income financing service. In total, KRW 300 billion of these guarantees were given to 5,000 households as of this November, a 21% year-on-year increase. 

An HF official said, “To help low-income people hit hard by the COVID-19 pandemic reduce their housing costs, we have offered KRW 9.2 trillion of jeonse loan guarantees through partnerships with local governments and financial institutions. This has led to a total of KRW 64.7 billion of savings, combining KRW 60 billion and KRW 4.7 billion of savings in annual interest costs and guarantee fees, respectively. We will continue to develop new products specifically designed for financially vulnerable groups, making our jeonse loan guarantees oriented more towards low-income people.“

In order to reduce housing costs for socially vulnerable groups, HF offers three jeonse loan guarantees through partnerships with related agencies and institutions. One of them is the jeonse loan guarantee for young people, which provides an interest rate discount of 0.3%p to 0.6%p based on HF’s partnership with 13 commercial banks. Another is the jeonse loan guarantee arranged by HF partnerships with local governments. Under the arrangement, local governments cover 1%p to 2%p of interest costs. The third guarantee is offered through an arrangement with individual financial institutions, in which these lenders offer an interest rate discount of 0.1%p to 0.2%p and HF gives the lowest guarantee fee rate of 0.05%.