Overdue payments on the Bogeumjari Loan, a state-backed mortgage program that helps low- and middle-income households and owner-occupier buyers purchase a home, have reached 548.9 billion won ($395 million). With rising interest rates and a slowing economy weighing most heavily on low-income borrowers, the delinquency rate for those earning 10 million won or less a year has climbed above 1%.
Data submitted by the Korea Housing Finance Corporation to the office of Rep. Park Sung-hoon of the People Power Party, a member of the National Assembly's National Policy Committee, showed that overdue Bogeumjari Loan balances totaled 548.9 billion won as of the end of July, according to the lawmaker's office on the 18th. That is roughly five times the 110.4 billion won recorded at the end of 2021. Over the same period, the delinquency rate rose 0.34 percentage points to 0.47% from 0.13%.
The overdue balance climbed steadily from 177.9 billion won at the end of 2022 to 333.5 billion won at the end of 2023 and 449.2 billion won at the end of 2024. It topped 500 billion won for the first time in May last year, then hit 564.3 billion won in February this year, the highest monthly figure since 2020. It has remained in the mid-500 billion won range since.
The strain was more pronounced among low-income borrowers. As of the end of July, the delinquency rate for borrowers earning 10 million won or less a year stood at 1.01%, more than double the overall average of 0.47%. That is about 3.3 times the 0.31% rate for borrowers earning more than 70 million won a year.
Under its standard terms, the Bogeumjari Loan is a fixed-rate mortgage of up to 50 years available to households with combined annual income of 70 million won or less buying a home priced at 600 million won or less. The loan-to-value ratio can reach 70%, with a ceiling of 360 million won. Rates on the Akkim-e Bogeumjari Loan stood at 4.9% for a 10-year term to 5.2% for a 50-year term in September.
Analysts said the rise in delinquencies deserves attention precisely because the Bogeumjari Loan offers relatively favorable terms as a policy loan. Kim Dae-jong, a professor of business administration at Sejong University, said the increase should not be read only as a soundness issue for financial institutions. "Because the Bogeumjari Loan is policy finance for low- and middle-income households, the rise in delinquencies should be seen as a problem of income and employment among vulnerable groups," Kim said. "It is a signal that cash flow among vulnerable groups is deteriorating considerably."
