The government made a decision to ease Loan-to-Value(LTV) regulations based on the judgement that the decade-old regulation is outdated and unreasonable for the recent property market. Moreover, the government took into consideration the fact that household debt structure is deteriorating and the interest burdens are rising for the ordinary people.
Although LTV regulation is a necessary financial measure to ensure financial consumer protection, it is not desirable that it is used to regulate the property market.
To such backdrop, the government will apply single LTV ratio of 70% in regardless of different regions and industries. Currently, the LTV ratio is applied differently according to regions from 50 to 85%. Moreover, some financial industries have different LTV ratio standards from 70 to 85%. Normalizing LTV ratio is expected to improve household debt structure and reduce interest burdens.
The government seeks to eliminate the LTV regulation’s functions for regulating property market while strengthening its positive role of improving financial stability.