earticle

영어

Housing mortgage in Korea is increasing faster than ever before. This increase has resulted in the housing mortgage regulations, putting a cap on the loan-to-value ratio (LTV) or debt-to-income ratio (DTI). Korean Government has justified these regulations by emphasizing the need to support household°Øs ability to repay the loan, to sustain the national financial system, and to stabilize or activate housing market.
This study, however, finds that the current application of the regulations has not corresponded to their intrinsic objectives. The current DTI level is too high to protect borrowers from the default risk. The level should be lowered to the common ratio of housing cost to household income, i.e. 30%. The LTV ratio is related to the overall financial system rather than the repayment ability, so under the conditions of the strict DTI, the maximum LTV should be extended. In addition, since the real LTV and DTI ratio of households does not coincide exactly with the statutory level, it should be reexamined to use mortgage regulations to boost or depress the housing market.