Korean gov’t, ruling party expand housing welfare program for young people

From right Won Hee-ryong, minister of land, infrastructure and transport, Yoo Ui-dong, chief policymaker of the PPP, and Kim Gi-hyeon, leader of the People Power Party (PPP). [Photo by Yonhap]

The South Korean government and the ruling party will raise the interest rate on the housing subscription savings account for young people and create a new program that offers mortgage loans at an annual interest rate of under 3 percent to help youths stabilize their living environment.

According to the Ministry of Land, Infrastructure and Transport on Thursday, the government and the ruling party will hold a meeting at the National Assembly on Friday to finalize the youth support measures.

The meeting will be attended by Kim Gi-hyeon, leader of the People Power Party (PPP), Yoo Ui-dong, chief policymaker of the PPP, and Won Hee-ryong, minister of land, infrastructure and transport.

Currently, the housing subscription savings account for youth can only be subscribed by those aged between 19 and 34 with a total salary of up to 30 million won ($23,076) among household heads that do not own housing. It also offers a preferential interest rate of 1.5 percentage points with the total annual interest rate reaching 4.3 percent depending on the subscription period.

If the subscriber keeps it for more than two years, the interest income will be tax-free for up to 5 million won and the subscriber is eligible for deductions at the same level as other housing subscription savings.

The government is mulling measures to provide low-interest loans at the 2 percent level for home purchases by young people who simply sign up for the housing subscription savings account so that they can use it more efficiently to gain home ownership.

The Land Ministry is also actively considering further reducing the interest rate on mortgage loans in accordance with life stages such as marriage, first child birth, and second or further child birth.

If more than one child is born, the annual interest rate is expected to go significantly lower to the 1 percent level.

“We want to make it easier for young people to save up and buy a home,” said a government official.

A senior member of the PPP also stressed that “it will offer young people the opportunity to build assets through homeownership” and “create a housing ladder of hope, including strengthening support throughout the entire life cycle.”

The government and the ruling party are also working on a plan to ease the eligibility requirements for the youth’s housing subscription savings account.

The only young adults currently eligible are those who live in deposit-based rental jeonse and monthly rental wolse and have completed household separation as the head of household through a move-in registration.

Those who live with parents cannot sign up, which has been criticized for lacking considerations for reality. Measures of raising the maximum interest rate to 4.5 percent per year from 4.3 percent are being considered to match commercial bank rates, according to sources.

Meanwhile, the number of people dreaming of buying a new home with a subscription savings account has been declining as new housing prices have risen recently.

According to the Korea Real Estate Board, about 25.75 million subscribed to housing subscription savings at the end of last month, down from 26.82 million a year ago.