SEOUL, Aug. 16 (Korea Bizwire) — The outstanding amount of “jeonse” home rental loans among young people rose sharply this year, a lawmaker said Monday.
South Koreans in their 20s and 30s hold 96.36 trillion won (US$73.3 billion) in debt issued to pay for deposit-based rental homes, said Rep. Jin Sun-mee of the Democratic Party, citing data from the Financial Supervisory Service.
This amount represents a year-on-year increase of 2.19 trillion won.
Under South Korea’s decades-old jeonse system, tenants pay a large lump-sum deposit, known as key money, to the landlord, which is then returned at the end of the rental agreement, which usually lasts two years.
During the lease period, the tenants do not pay monthly rent.
With the soaring prices of no rent, full-deposit homes, South Koreans in their 20s and 30s are increasingly relying on debt to pay for the majority of their deposit.
Among all deposit-related debt in the banking sector as of April, 816,353 people were in their 20s and 30s, accounting for 61.1 percent. In late 2019, the proportion was 56.5 percent.
Most loans for “jeonse” home rentals are pegged to a floating interest rate, which exposes borrowers to the risk of rising interest rates.
COFIX, or the Cost of Funds Index, a benchmark lending rate for mortgage loans, stood at 2.38 percent as of June, up by 1.46 percentage points since a year ago (0.92 percent).
M. H. Lee (email@example.com)