South Korea’s Financial Services Commission announced additional measures to strengthen household loan management under the government’s housing market stabilization plan, focusing on mortgage and jeonse lending in the Seoul metropolitan area and other speculation regulated areas. The package is intended to preemptively curb loan-driven housing demand as housing prices continue to rise in some Seoul-area districts. From October 16, maximum mortgage borrowing for home purchases in the Seoul metropolitan and speculation regulated areas will be capped by house price: KRW600 million for homes up to KRW1.5 billion, KRW400 million for homes over KRW1.5 billion up to KRW2.5 billion, and KRW200 million for homes over KRW2.5 billion. The stressed debt service ratio (DSR) system will also be tightened for mortgages in these areas by raising the additional stress rate to a minimum of 3.0% (from the previous 1.5% to 3.0% range). From October 29, scheduled interest payments on jeonse loans taken by existing homeowners as lessees in the Seoul metropolitan and speculation regulated areas will be included in the borrower’s DSR. In the banking sector, the minimum risk weight on mortgage loans will increase to 20% from 15% from January 1, 2026, brought forward from April 2026. Strengthened loan rules will apply immediately in newly designated speculation regulated areas, including tightening the loan-to-value (LTV) ratio for mortgages to 40% from 70% and restricting current jeonse loan or credit loan borrowers from purchasing homes, while LTV for non-residential (commercial) mortgages in newly designated land transaction permit zones will also be lowered to 40% from 70%. The FSC and related organizations plan to implement the measures starting October 16 and prepare interim provisions for borrowers who signed housing transaction contracts or applied for loans before the announcement. Financial companies will be inspected for compliance and housing loan trends monitored, with regular meetings with industry groups to support implementation; authorities also signaled potential future expansion of DSR application to jeonse loans after reviewing initial results.
South Korea Financial Services Commission 2025-10-15
South Korea Financial Services Commission tightens housing loan rules with tiered mortgage caps and tougher DSR requirements
South Korea's Financial Services Commission announced measures to strengthen household loan management under the housing market stabilization plan, focusing on mortgage and jeonse lending in the Seoul metropolitan area. From October 16, mortgage borrowing limits will be capped based on house prices, and the stressed debt service ratio (DSR) system will be tightened. Additional measures include increasing the minimum risk weight on mortgage loans to 20% from January 2026 and lowering the loan-to-value ratio for mortgages in newly designated speculation regulated areas.