South Korea plans to offer mortgages with advantageous interest rates to parents of newborns in the latest effort to fight the decline in fertility rates and slow the ageing of society.

Parents will be eligible to apply for a mortgage with a rate of between 1.6 per cent and 3.3 per cent for five years if they have had a child in the last two years and together earn 130 million won (S$132,699) or less annually, according to a statement from the Ministry of Land, Infrastructure and Transport.

That’s about 1 to 3 percentage points cheaper than loans offered by commercial banks, it said.

The measure underscores a heightened sense of urgency among Korean policymakers as they seek to ease housing costs for parents even as the central bank keeps its benchmark rate at the restrictive level of 3.5 per cent. The Bank of Korea has tightened its policy for more than a year in an effort to rein in asset bubbles.

South Korea has had the world’s lowest fertility rate for years. The rate, which slid to 0.78 in 2022, refers to the number of children a woman is expected to bear during her lifetime. Soaring home prices are often cited among reasons for those who are reluctant to have kids.

If a parent who is already benefiting from the special mortgage has another child, the government will cut the rate by another 20 basis points and extend the borrowing period by five years, the ministry said. BLOOMBERG

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