South Korea’s Financial Services Commission announced a package of measures to curb household debt growth driven by mortgage lending in the Seoul metropolitan area, combining lower annual lending targets with tighter mortgage, jeonse and credit loan constraints across financial sectors. The annual target volume for household loans will be revised down, with financial companies’ own household loan targets across all sectors cut to 50 percent of the previous level from the second half of the year and government policy loan supply plans reduced by 25 percent. Bank-led voluntary household debt management measures will be extended to other financial sectors, including an effective ban on additional home purchases financed by mortgages for current homeowners in the Seoul metropolitan area and speculation regulated zones (LTV set to zero percent), a KRW100 million cap on “livelihood stability” mortgage loans in those areas and a ban for multiple-home owners, a 30-year maturity limit on mortgages, and a prohibition on jeonse loans that include an ownership-transfer condition. The package also caps purchase mortgages in the Seoul metropolitan area and speculation regulated zones at KRW600 million, tightens first-time homebuyer LTV to 70 percent from 80 percent and adds a six-month move-in requirement, applies the same move-in requirement more broadly to mortgage-backed purchases and relevant policy loans, reduces maximum limits on key policy loan products, and lowers the guarantee ratio on jeonse loans in the Seoul metropolitan area and speculation regulated zones to 80 percent from 90 percent. The authorities plan to implement the measures immediately and to introduce interim arrangements for borrowers who have already signed purchase or jeonse lease agreements or completed loan applications. Supervisors will monitor compliance and lending trends, meet related organizations weekly, and indicated they may roll out additional steps if needed, including further LTV tightening, expanding the application of the debt service ratio (DSR) to jeonse and policy loans, or tightening macroprudential regulations.
South Korea Financial Services Commission 2025-06-27
South Korea Financial Services Commission tightens Seoul area household debt controls with lower lending targets and a KRW600 million mortgage cap
South Korea's Financial Services Commission announced measures to curb household debt in Seoul by reducing annual lending targets and tightening mortgage, jeonse, and credit loan constraints. Actions include halving financial companies' household loan targets, capping purchase mortgages at KRW600 million, and imposing stricter loan-to-value (LTV) ratios. The measures will be implemented immediately, with supervisors monitoring compliance and potential further regulatory actions.