The Financial Services Commission held a meeting with officials from the relevant government ministries and organizations on November 8 and discussed the current household debt situation and various measures to ensure effective management.
Regarding the October household loans data announced earlier today, the participants had a positive assessment about the slowing trend of mortgage loans, despite an overall increase in the size of household loans from the previous month. To continue to ensure a stable management of household loans, the authorities agreed on the need to strengthen relevant measures as follows. First, the authorities will bolster rules on debt service ratio (DSR) by closely reviewing the areas that are currently being exempted from DSR regulation and look into ways to gradually expand the application of DSR rule. The stressed DSR limit that is currently being reviewed for application on variable interest rate loans is expected to be announced in December this year with specific details. Second, the authorities will come up with stronger incentive structures that can reward banks to more actively and voluntarily introduce long-term, fixed interest rate mortgage loans by overhauling a relevant administrative guidance. The authorities will also seek to provide more incentives for covered bonds, which serve as a mechanism for banks to fund long-term, fixed rate loans. Third, the authorities will continue to keep close tabs on the trends of household loan growth across all financial sectors. Fourth, the authorities will work with financial sectors to come up with various ways to help reduce the burden of repayment and high interest rate for borrowers, for instance, by offering a temporary exemption from early repayment charges.
At the meeting, FSC Secretary General Lee Se-hoon said that as it is difficult to achieve short-term results when it comes to containing household debt, the government will make efforts with a long-term perspective to build an incentive structure that can help to establish the practice of borrowing within one’s payment capacity through a fixed rate and installment payment structure.
* Please refer to the attached file for details.