The Financial Services Commission held a meeting on household debt with officials from related ministries, financial institutions, and industry groups on October 15 and announced additional measures to strengthen household loan management for implementing the government’s housing market stabilization plan.
At the meeting, officials assessed that household debt growth has been largely stabilized since the introduction of “June 27” household debt management measures. However, in certain districts of the Seoul metropolitan area, housing prices have continued to move upward. With expectations for rate cuts and continuation of brisk housing market conditions, it is concerning that the market overheating in certain areas may spread to other regions. As such, the financial authorities viewed that it is necessary to introduce additional measures to preemptively control demand for housing loans.
Key Measures
Applying Different Levels of Maximum Mortgage Loans Based on House Prices (Effective from Oct. 16)
The maximum amount of mortgage loan a borrower is eligible to take out for purchasing a house in the Seoul metropolitan and speculation regulated areas will be determined differentially based on the price (market value) of house. For houses with market value of up to KRW1.5 billion, the maximum amount of mortgage loan will remain the same at the current level of KRW600 million. For houses priced at more than KRW1.5 billion and up to KRW2.5 billion, the maximum amount of mortgage loan will be reduced to KRW400 million from the current level of KRW600 million. For houses valued at over KRW2.5 billion, the maximum amount of mortgage loan will be reduced to KRW200 million from the current level of KRW600 million. The differentially determined cap on mortgage loans will help to more effectively control demand for purchasing highly priced homes in the Seoul metropolitan and speculation regulated areas using mortgage loans.
Tightening Stressed DSR Rule (Effective from Oct. 16)
The current level of additional stress rate (between minimum 1.5 percent and maximum 3.0 percent) applied when calculating borrower’s debt service ratio (DSR) under the stressed DSR system will be adjusted upward to minimum 3.0 percent for mortgage loans in the Seoul metropolitan and speculation regulated areas. This upward adjustment in the additional stress rate will help in part to offset the potential impact of interest rate cut in the future possibly pushing up individual borrowers’ maximum loan amounts.
Applying DSR on Jeonse Loans for Current Homeowners (Effective from Oct. 29)
When a homeowner takes out jeonse loan as a lessee in the Seoul metropolitan and speculation regulated areas, the borrower’s scheduled interest payments on jeonse loan will be calculated into his or her debt service ratio (DSR). After examining the progress of applying DSR on jeonse loans for homeowners, authorities may consider ways to gradually expand the application in the future.
Early Implementation of Increased Mortgage Loan Risk Weight in Banking Sector (Effective from Jan. 1, 2026)
The minimum risk weight applied on mortgage loans in the banking sector was previously scheduled to be increased to 20 percent from the current level of 15 percent effective from April 2026. However, this initial schedule will move up to January 1, 2026 for early implementation. This will help to address the issue of excessive concentration of funds in the housing market and propel a transition toward productive finance.
Immediate Implementation of Strengthened Loan Rules in Newly Regulated Areas
The strengthened loan regulations— tightening of loan-to-value (LTV) ratio on mortgage loans to 40 percent from the previous level of 70 percent and restricting current jeonse loan/credit loan borrowers from purchasing houses—will take effect immediately for newly designated speculation regulated areas. This will help to more effectively control demand for housing loans in these areas. With the designation of new land transaction permit zones this time, the LTV ratio for non-residential (or commercial) mortgage loans will also be lowered to 40 percent from the previous level of 70 percent.
Further Plan
The FSC and related organizations plan to immediately and swiftly implement these measures starting from October 16. For those who have already entered into housing transaction contracts or applied for housing loans prior to this announcement, the financial authorities will prepare interim provisions to ensure protection of borrowers and prevent disadvantages for non-speculative homebuyers.
In addition, the authorities will thoroughly inspect financial companies to make sure their compliance with the tightened regulations and continue to track trends in housing loans. The authorities will also continue to have meetings with relevant organizations and industry groups on a regular basis to make sure that these measures are adopted and implemented seamlessly in the market.
While continuing to closely monitor trends in household loans and housing market situations, the authorities will be prepared to swiftly introduce additional measures based on market conditions in the future when it becomes necessary.
* Please refer to the attached PDF for details.