South Korea Financial Services Commission confirms third-stage stressed DSR from 1 July with 1.50% add-on stress rate and delayed uplift for non-Seoul mortgages

South Korea's Financial Services Commission (FSC) has published detailed measures to implement the third-stage stressed debt service ratio (DSR) rule from 1 July 2025, increasing the interest-rate stress applied when calculating DSR for household lending. The plan follows a household debt meeting with related ministries, industry groups and five major banks, held amid a pickup in household loan growth including a KRW 5.3 trillion month-on-month rise in April. The third-stage stressed DSR will generally apply an additional stress rate of 1.50 percentage points to all household loans subject to DSR limits across all financial sectors. Mortgages for purchasing homes outside the Seoul metropolitan area will continue to apply a 0.75 percentage point add-on until end-December 2025. For mortgages with mixed or periodically changing interest-rate structures, the additional stress rate will be adjusted upward to encourage financial institutions to expand fixed-rate lending. Transitional arrangements keep the current second-stage stressed DSR for group loans for new apartment subscriptions announced by 30 June and for purchase mortgages where the real estate contract is signed by 30 June. The FSC plans to reassess at end-2025 whether to raise the additional stress rate for non-Seoul area purchase mortgages after reviewing local economic conditions and the impact on overall household debt, while monitoring effects on non-speculative homebuyers. The authorities will continue to track firms’ monthly and quarterly household debt management targets and be prepared to act if loan growth accelerates.