Survey Shows That 5 of Every 10 Mortgage Borrowers Prefer a Fixed-Rate Mortgage
- Date 2017-01-11
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Survey Shows That 5 of Every 10 Mortgage Borrowers Prefer a Fixed-Rate Mortgage
- The average mortgage amount taken out is KRW 113.73 million, while the most preferred type is a 30-year mortgage
- On average, KRW 67.35 million of a Jeonse loan is taken out and Jeonse loans of KRW 100 million or above account for 26.5% of total Jeonse loans taken out in the nation
- Three out of every four households are planning to purchase a home
According to a nation-wide survey on housing finance, five out of every ten expectant home-buying households prefer a fixed-rate mortgage. Home-buying households are also found to take out a mortgage of KRW 113.73 million on average, and the most preferred mortgage type is a 30-year term mortgage. In addition, three out of every four households responded that they are planning to purchase a house.
The Housing Finance Research Center, a research organization run by Korea Housing Finance Corporation (HF, CEO Kim Jae-Chun), announced on the 11th that it conducted the？？2016 Suvery on the Demand for JTKY and Bogeumjari Loan.' Conducted jointly with a survey agency, the survey explored consumer trends in the housing and home financing markets. The survey was conducted from August 8 to September 30, 2016, on 5,000 ordinary households (whose head is 20 to 59 years of age) and another 2,000 households with a Bogeumjari Loan.
□ Over half of the households willing to take out a mortgage prefer a fixed-rate mortgage
Among 1,935 households willing to take out a mortgage in the near future, 50.4% of them prefer a fixed-rate mortgage, while 26.0% and 23.6% prefer an adjustable-rate mortgage and a flexible mortgage, respectively.
Asked why they prefer the fixed-rate type, 59.3% of prospective fixed-rate mortgage borrowers responded that the same loan rate is maintained regardless of a raise in market rates. In addition, 21.8% of them said that there is no need to worry about loan rate changes. This shows that people choose fixed-rage mortgages over other types of mortgages mainly out of concern over possible rate increases.
Among 2,000 households with a Bogeumjari Loan or Didimdol Loan, 84.3% of them said that they considered the rate on their loan before taking out the loan. Bogeumjari Loan borrowers responded that the greatest merit of the fixed-rate loan is that their debt burden does not increase despite rate increases in the market.
□ Homebuyers take out a KRW 113.73 million mortgage on average, and they prefer 30-year mortgages
The average amount of mortgage taken out by homebuyers is KRW 113.73 million. For Bogeumjari Loans, the average amount borrowed is KRW 105.22 million. For Didimdol Loans, it stands at KRW 101.20 million.
By mortgage term, 23.1% of mortgage borrowers chose a 30-year term. In addition, 20.6% and 17.0% are found to have taken out a 20-year and 10-year mortgage, respectively.
The average amount of monthly repayments per household is KRW 600,000, and 41.5% of mortgage borrowers are found to feel burdened by their monthly repayments.
□ 35.5% of survey respondents expect house prices to rise this year
The survey also asked 5,000 ordinary households about house prices in the year ahead. Of them, 35.5% said house prices will climb a year later, while 26.6% expected a drop in house prices. Asked to predict house prices in three to five years, 38.5% expected a drop.
□ Prospective homebuyers prefer subscription for a new apartment unit and their preferred purchase price is KRW 308.76 million
Households considering purchasing a new home said that their desired home price, on average, is KRW 308.76 million (or KRW 446.80 million for a house in Seoul). The desired purchase price has been on a upward trend since 2012. Notably, the older the age of the household head, the higher the price.
Of potential homebuyers, 42.3% responded that they are considering purchasing a subscription for apartments to be built, while 35.1% said that they will buy an existing apartment unit. And 10.2% showed interest in subscribing for a new Bogeumjari home.
□ The average amount of a Jeonse loan taken out is KRW 67.35 million, and 26.5% of Jeonse loans exceed KRW 100 million
The survey shows that the average amount of Jeonse loans taken out is KRW 67.35 million. Among households with a Jeonse loan, the percentage of those with a loan of KRW 100 million or more stands at 26.5%.
In addition, it is found that households' willingness to purchase their first home increases sharply when their Jeonse price reaches 70 to 80 percent of the property price.
Of households that are considering extending their Jeonse contract, 52.4% said that they can accept a Jeonse deposit increase as long as the amount of increase is 10% or less of the initial deposit. The figure decreased sharply to 15.9% when the amount of deposit increase exceed 10%. Those who live on a two-year Jeonse lease scheme in Seoul and Gyeonggi Province or with a high deposit are more tolerant to Jeonse deposit increases.
In the meantime, the average amount of Jeonse deposit is KRW 151.14 million. In the case of those living on a monthly rent scheme, the average amount of security deposit and monthly rent is KRW 35.74 million and KRW 390,000.
□ Three out of every four households are considering purchasing a new home
Of the 5,000 ordinary households surveyed, 75.4% (or 3,769) said that they are willing to buy a home in the future. More than half (53.9%) of the households considering a new home purchase said that they are willing to purchase a home in the next three years. In addition, 49.7% of households without home ownership said they will purchase their first home in the next three years, and the figure is up 3.4% from a year earlier.