627 Household Debt Measures, Mortgage Regulations - The End of the Era of Borrowing to Buy a Home

Introduction: An Unexpected Shock, The Beginning of a New Order

At the end of June 2025, the first real estate policy of the Yoon Seok-yeol government was announced abruptly. However, this measure was not a conventional real estate regulation. Beneath the exterior of 'real estate,' the essence was a rigorous control over 'finance.' This policy, implemented at a time unexpected by both experts and the market, and with a higher intensity than anticipated, demonstrated a speed and completeness akin to a military operation. This policy targets the structural maladies that Korean society has been grappling with for decades, namely the accumulation of household debt mediated by real estate, the structuring of speculation, and the parasitic profit models of financial institutions. It is not merely a measure to control short-term prices, but rather a paradigm shift that seeks to change market perception and alter the rules of the game.

The Reality of Measures: Uncompromising Confrontation

This measure shows a clear difference from the policies of past governments. First, the targets and conditions for mortgage loans have been uniformly restricted. Mortgage loans for those who own more than one house have been banned, and the loan maturity has been limited to a maximum of 30 years. This is a step taken to prevent 'loan shopping' that exploits differences between banks' products. Second, the gap between the announcement and implementation was just one day, which blocked the market's response itself. By having the policy announced on Friday and immediately implemented on Saturday, the strategic choice of 'Saturday implementation', rather than Sunday, reflects a determination not to allow any confusion in the market. Third, the inclusion of measures that far exceed the level of discussion even at the meeting with invited experts clearly conveys to the market that the decision-making body exercised leadership without compromise.

What were you trying to stop: The cycle of speculation and debt

The target of the policy is clear. It is the 'gap investment' class that has used excessive leverage to purchase high-priced apartments centered in Gangnam. In recent months, there have been frequent investment patterns where more than 2 billion won in loans were utilized to buy apartments worth around 5 billion won, with interest payments exceeding 10 million won per month. This is not normal consumption or asset accumulation but rather reckless debt investment based on the premise of future asset value appreciation. The problem is that such leveraged investment is not limited to a specific class. When prices in Gangnam rise, the expectation surrounding it spreads nationwide, and the housing market has repeatedly overheated as a result. This measure is a proactive step to block that domino effect. Furthermore, from the perspective of financial institutions, mortgage loans are a 'golden egg' that guarantees stable returns in the long run. Loans with maturities of 50 or 40 years create a structure in which a household becomes an 'interest-producing entity' for half a century, forming an established system due to collusion between the "Mofia" (a group of financial bureaucrats) and the financial sector. This measure is evaluated as a fundamental blow to that established system.

Who is the victim: The illusion of the 'dirt spoon' frame

Immediately after the policy announcement, some media outlets strongly reacted by framing it as 'the failure of high-income underprivileged individuals to enter Gangnam' and 'only cash-rich individuals can buy homes.' However, when examining the actual lending conditions, their claims lack persuasiveness. For instance, to secure a mortgage of 600 million won, a minimum annual income of over 150 million won and the stipulation of no existing loans are required. This condition exceeds the income level of ordinary 'common people,' indicating that regulating their entry into Gangnam effectively restricts the rights of privileged investors. These media frames set Gangnam as a target for 'entry' and distort reality by portraying middle and upper classes as 'underprivileged.' Stabilizing housing prices is the true protection policy for ordinary citizens, and the assertion that 'loans should be available to be for the common people' is a dangerous logic that justifies a sustainably unsound debt society.

The Bigger Picture: Structural Transition of Asset Markets

This policy aims not only for short-term market adjustments but also targets the structural reorganization of the entire Korean asset market. For decades, Korean society has operated on the premise that 'housing prices will inevitably rise,' viewing housing as a means for asset accumulation. The government and financial institutions expanded lending by capitalizing on this trend, leading to a structure where the construction industry's failures were offloaded onto household debt. Now the government is overturning that premise. It has sent a strong message to the market that 'housing prices will be managed by the government, and investing in real estate using debt is no longer valid.' Consequently, the flow of excess capital is changing. In the past, even wealthy individuals concentrated on real estate, but recently, there has been an increase in domestic stock investment even in areas like Gangnam, reflecting a shift in market perception. The government is also planning follow-up measures, such as amendments to the Commercial Act and enhancing transparency in the capital markets, to solidify trust in the stock market, which will be a crucial turning point in restoring balance to the asset market.

Political Significance and the Nature of Lee Jae-myung's Leadership

One particularly notable aspect of the policy implementation process is President Lee Jae-myung's unique leadership style characterized by 'unannounced enforcement, uncompromising decisions, and responsible execution.' President Lee, coming from a background of small local government leadership, has a strong understanding of administrative realities, as well as an insight into why policies fail and how public organizations operate. This enables him to implement policies that are 'a cut above what experts typically envision' without prior notice, showcasing both sophistication and decisiveness by blocking any bypasses. Such leadership has a significant impact on the market. The trust signified by "if we say we'll do it, we will" enhances the predictability of policies, serving as a key factor in stabilizing the psychology of both consumers and investors. While there has been a widespread perception that 'the government cannot control housing prices' due to distrust in policies, this recent measure has fostered a belief that "this government can implement policies and produce effective results.

Conclusion: The Turning Point of the Korean Real Estate Paradigm

This real estate financial policy is not just a simple regulation but a turning point for the structure of assets in Korea and policy trust. It was a bold decision to put an end to the asset value structure built on debt, the collapse of boundaries between investment and speculation, and the government's market neglect. The declaration to end the era of 'buying a house with borrowed money' shows the direction to structurally reduce the debt risks that all citizens must bear and transition to a healthy housing market centered on actual demand. The political burden of the policy was significant, but the resolve and leadership that the government has shown are highly appreciated. If this measure demonstrates effectiveness and garners social consensus in the future, the Korean economy will reach a turning point towards a more sustainable and sound asset system.