S. Korea seeks to ease home loan rules, take stimulus steps

http://english.yonhapnews.co.kr/national/2012/07/22/12/0301000000AEN20120722002400315F.HTML

SEOUL, July 22 (Yonhap) -- South Korea plans to ease mortgage lending limits and take other measures in a bid to tackle the housing market slump and spur domestic demand, the presidential office said Sunday.

   The plan, which came after a government-private meeting, calls for relaxing the so-called debt-to-income (DTI) ratio, which serves as a major tool to control housing loans by tying the maximum amount of money that home buyers can borrow to their income levels.

   The current ceiling is 40-60 percent in Seoul and the surrounding Gyeonggi Province, the nation's most populous region.

   "We will maintain the basic principle of DTI and plan to complement irrational parts (of the system) for those who actually want to buy houses," Kim Dae-ki, the chief presidential economic advisor, said at a briefing, without elaborating.

   The growing number of people who can't afford to make payments on their home loans emerged as a major concern as policymakers brace for an economic slowdown in the wake of the eurozone debt crisis.

   During the meeting, which lasted nearly 10 hours through midnight, officials and industry experts agreed to a set of measures aimed at spurring foreign investment and tax support for small and medium companies as well as eased regulations on building new hotels and resorts, participants said.

   As a way to spur domestic demand, the government officials and businessmen agreed to encourage employees to use up their vacations during the summer, they said.

   Kim said the finance ministry will hold a meeting on Monday with related agencies to prepare follow-up measures aimed at boosting domestic demand in Asia's fourth-largest economy.

   The stimulus plan comes as South Korea's economy has been losing steam in the face of the eurozone debt crisis and a global economic slump that have made a dent in exports, the main driver of its growth.

   In the second quarter, Asia's fourth-largest economy is estimated to have grown a mere 0.5 percent on-quarter, slowing from a 0.9 percent expansion in the first quarter, hit by plummeting exports.

   About a week ago, the Bank of Korea downgraded its 2012 growth outlook for the economy to 3 percent from an earlier 3.5 percent, citing sinking overseas shipments. Some private economists warn that South Korea's annual growth rate could fall below 3 percent.


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