A recently implemented loan transfer program may alleviate the interest burden for mortgage loan borrowers but is also expected to considerably cut back on banks’ annual profits, financial analysts said Monday.

Taxpayers, too, may eventually suffer the consequences, as the state-run Korea Housing Finance Corporation will inevitably increase its capital in order to meet loan transfer demands.

Under the government-backed loan scheme which closed last Friday, 33.9 trillion won is to be converted from short-term, floating-rate loans into long-term, low-fixed-rate ones.

Considering the long-term effect of these loans, the annual impact on the local banks’ profits is estimated to amount to 300 billion won ($279 million) or more, according to multiple officials in the banking and securities industries.

The banks that have sold the low-rate loan transfer products to their borrowers are to purchase the same amount of mortgage-backed securities from the corporation.

This means that the state-run housing financer will take the burden of the loan transfer program.

The corporation was slated to issue 35 trillion won worth of mortgage-backed securities this year, including 20 trillion won of securities that were released in the first batch of the program. But the amount was increased to 55 trillion won, which means the housing financer will have to increase its capital, effectively adding to the state’s liabilities.

Banks also expressed dissatisfaction over the immediate financial burden, especially as the government had formerly limited the ceiling to 20 trillion won but later doubled the amount due to soaring demand.

“The burden of purchasing mortgage-backed securities from the Housing Finance Corporation is too great,” said a local bank chief in a meeting with Financial Services Commission chairman Yim Jong-yong on Friday.

Yim answered that the FSC would seek ways to reduce the burden, but that no detailed solutions had been suggested so far.

By Bae Hyun-jung (tellme@heraldcorp.com)