South Korea's Financial Services Commission (FSC) has announced that borrowers are expected to face stricter lending standards this year as banks in the country have started lending again after months of temporarily suspending their household and mortgage loans. In December, the FSC said that it has decided to apply stricter rules for ‘jeonse’ loans. Jeonse is a housing lease system unique to Korea whereby tenants pay a refundable lump-sum deposit instead of monthly rent on a two-year contract. The loans are relatively easy for borrowers to get, because they are issued directly to the property owner, rather than the borrower, and secured against the property. On top of it, the Bank of Korea’s decision to raise its benchmark interest rate to 1% in November 2021 alongside experts’ forecasts of at least two rate hikes scheduled for this year is likely to add further volatility to loan interest rates.
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