The use of mortgage loans in the housing finance market is aimed at raising the ability of low-income households to purchase homes, as well as, middle-income households by raising the LTV. In addition, extending the loan period can alleviate the household’s financial burden of repaying loans, which would increase demand for home buying.

Korea introduced long-term mortgage loans by establishing Korea Housing Finance Corporation only in March 2004. The business environments facing the Korea Housing Finance Corporation are not so favorable for various reasons. This study examined four ways of expanding the house finance market: increasing the supply of mortgage loans through some regulation changes, promoting the MBS market, establishing mortgage banks, and introducing mortgage insurance. These policy measures are likely to promote the housing finance market and improve residential stability for low- and middle-income households.