[Household Debt Measures] Lee Sehun, Director of Financial Policy Bureau, "90% of Borrowers Unaffected by DSR Introduction"

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] Lee Se-hoon, Director of the Financial Policy Bureau at the Financial Services Commission, stated on the 29th at a briefing on household debt management measures held at the Joint Briefing Room of the Government Seoul Office in Jongno-gu, Seoul, that "more than 90% of borrowers will not feel any changes due to the introduction of the Debt Service Ratio (DSR) system."

During the Q&A session with reporters after the briefing, Director Lee emphasized, "Looking at the average DSR in the banking sector, it is in the 30% range, so even if a 40% level DSR is applied, most borrowers, about more than 90%, will not be affected by this DSR regulation."

He added, "Some borrowers, especially those who have borrowed excessively from financial institutions regardless of income, may be affected by the DSR regulation," but asserted, "these are extremely rare cases."

Director Lee continued, "When applying DSR per borrower, installment repayment of large credit loans will naturally occur," explaining, "To receive a large credit loan, it is inevitable to repay in installments over several years, and without this, large credit loans cannot be granted. Therefore, applying DSR per borrower induces installment repayment of large credit loans."

Regarding whether the DSR regulation applies only to new borrowers, he said, "As with previous measures, it applies only to new loan cases."

In response to the question, "How do you expect the credit loan limit to change with the adjustment of the DSR calculation maturity from 10 years to 7 or 5 years?" he answered, "Adjusting the DSR maturity from 10 years to 5 years means comparing the amount of money that can be repaid over 10 years with that over 5 years. If income remains the same, the amount that can be repaid will be reduced by half."

When asked, "What happens if, after reflecting future income of the youth in the DSR calculation method considering the life-cycle income, actual income does not increase?" Director Lee explained, "This is a risk that financial companies must bear, and mid-term loan recalls may occur."

Regarding the scale of household debt easing due to the implementation of this household debt management plan, he said, "Last year, the household loan growth rate was about 8%, which means household debt increased by approximately 120 trillion won. This year, the target is to manage it at around 5 to 6%, and from next year onwards at about 4%, so the increase will be decided between 80 trillion and 100 trillion won."

Director Lee added, "Along with this household debt management task, we had planned to announce regulatory reforms to support home ownership for low-income and actual demanders," and said, "It is desirable to comprehensively reform not only financial loan regulations but also tax and housing supply systems, so we plan to announce separate measures soon."