New registrations for reverse mortgages in Korea reached a record again in the first half for two years in a row amid the overall housing market downturn.
According to data from the Korea Housing Finance Corp. provided to Representative Choi Seung-jae of the People Power Party on Monday, the number of new reverse mortgage registrations for the first half totaled 8,109, up 17.1 percent from 6,923 new registrations during the same period last year.
Looking at the first-half figures, the number of new reverse mortgage registrations declined from 6,044 in 2019 to 5,124 in 2020, and 5,075 in 2021 until it saw a sharp increase to 6,923 in 2022, and to 8,109 this year.
On an annual basis, the total number of new reverse mortgage registrations reached a record 14,580 in 2022, up 34.9 percent compared to 10,805 registrations in 2021.
As the number of reverse mortgage subscribers continues to rise, the pension payout in the first half of this year amounted to 1.18 trillion won ($922 million), up 35.7 percent from 873.9 billion won during the same period last year. This is the first time the pension payout has exceeded one trillion won in the first half of a year since the introduction of the reverse mortgage system in 2007.
The record-breaking new registrations for reverse mortgages are primarily attributed to the continuing slump in housing property prices. The payout amount of the reverse mortgages is determined based on the appraised property value at the time of registration, making it more advantageous to join the reverse mortgage more quickly when the property prices on a downward trend.
Although housing prices have been rising, including in key areas of Seoul, it is still early to see it as an overall recovery, which may have led many individuals to hurry and join reverse mortgages.
Another factor contributing to the increase is the accelerated pace of aging in the nation. According to Statistics Korea, the population aged 65 or older surpassed 9 million for the first time last year.
The upward trend in reverse mortgage registrations is likely to continue for some time, as the property value requirements for reverse mortgage registrations will be eased to 1.2 billion won or less from 900 million won or less under the new enforcement decree that will take effect from October 12. The government estimates that approximately 140,000 additional households will become eligible for reverse mortgages.
“This upward trend in reverse mortgage registrations is expected to continue. Given the eased requirements for reverse mortgage registrations starting from October, adjustments in the pension payout limits will have to be considered,” said Choi.
Reverse mortgages are a system where property owners aged 55 and above provide their homes as collateral and receive monthly pension payments for their entire lives while continuing to reside in the property. As of the first half of this year, the average price of homes under reverse mortgage contracts stood at 371 million won, with the Seoul metropolitan area at an average of 434 million won and other regions at 237 million won. The average monthly payout was 1.17 million won, with the metropolitan area at an average of 1.34 million won and other regions at 822,000 won.
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