[Q&A] Financial Services Commission: "Reducing Annual Household Loan Growth by 20 Trillion Won to Stabilize Housing Prices"

Total Household Loan Target Slashed to 50% of Original Plan
Policy Loans Also Cut by 25% from Annual Supply Plan
Mortgage Loan Cap Set at 600 Million Won in Seoul and Other Regulated Areas

On the 27th, apartment prices in Mapo and Seongdong districts of Seoul rose at the largest rate since related statistics began to be published in 2013. The expectation that Seoul apartment prices will continue to rise is forecasted to sustain the upward trend for the time being. The photo shows a panoramic view of apartment complexes in downtown Seoul as seen from Namsan, Seoul. 2025.06.27 Photo by Dongju Yoon

As housing prices in Seoul have surged and household debt has increased significantly, the government has decided to sharply reduce the amount of household loans available across all financial sectors. To prevent excessive use of bank loans for the purchase of high-priced homes in Seoul, the maximum limit for mortgage loans for home purchases in regulated areas will be capped at 600 million won. Multiple-home owners will be completely prohibited from taking out mortgage loans.

On the morning of the 27th, the government held an "Emergency Household Debt Review Meeting" at the Government Complex Seoul, with the Financial Services Commission, Ministry of Economy and Finance, Ministry of Land, Infrastructure and Transport, and the Bank of Korea in attendance. At the meeting, it was decided that, starting in the second half of this year, the total annual target for household loans across all financial sectors will be reduced to 50% of the original plan. Policy loans such as the Didimdol Loan and Bogeumjari Loan will also be reduced by 25% compared to the annual supply plan. If the government’s plan is implemented as intended, the annual increase in household loans will decrease by up to 20 trillion won.

The government will also specifically cap the maximum amount of mortgage loans for home purchases handled by financial institutions in the Seoul metropolitan area and regulated regions at 600 million won, in order to restrict excessive borrowing for high-priced homes. These regulations will take effect immediately from the 28th.

The following is a Q&A with Shin Jinchang, Director General of Financial Policy at the Financial Services Commission, and Jung Suho, Head of the Housing Fund Division at the Ministry of Land, Infrastructure and Transport.

- If the total annual target for loans (excluding policy loans) across all financial sectors is reduced to 50% of the original plan, by how much will the amount decrease?

▲Currently, the total amount of household loans is about 1,800 trillion won. The government originally intended to manage the annual increase at around 75 trillion won, taking into account the real growth rate (3-4%). With the nominal growth rate forecast having dropped by 1 percentage point and the total loan target now being cut to 50%, the annual increase will be reduced by about 20 trillion won. In the second half of the year, we expect a reduction of more than 10 trillion won.

- Has there ever been a measure to limit the maximum amount of mortgage loans for home purchases before? Why was the limit set at 600 million won?

▲This is the first time that the maximum amount of individual mortgage loans has been restricted in this way. In 2019, there was a similar measure that completely banned loans for homes priced at 1.5 billion won or more, but it was criticized as being too uniform and even led to a constitutional complaint. The 600 million won limit was determined by comprehensively considering the housing price levels in Seoul and the metropolitan area, the extent to which people use financial sector loans, and what level of debt relative to income is appropriate.

- How many people take out loans exceeding 600 million won?

▲While not all loans have been surveyed, based on first quarter loan data, it is estimated to be a small minority, less than 10%.

- What are the transitional provisions for each of the strengthened loan regulations?

▲For mortgage loans for home purchases, if a purchase contract was signed and the deposit already paid (provisional contracts are not recognized) before the effective date (28th), the previous regulations will apply. For interim payment and relocation loans, if the recruitment notice for residents was issued before the effective date, the previous regulations will also apply. If there is no recruitment notice, the previous rules will apply if a construction start report was filed, or if a management disposition approval was granted for members of reconstruction or redevelopment associations. However, if rights to units in already announced projects are resold after the effective date, the strengthened regulations will apply. For jeonse loans, if a lease contract was signed and the deposit already paid (provisional contracts not recognized) before the effective date, the previous regulations will apply. If a jeonse loan or guarantee is extended due to lease renewal rights, the previous rules will also apply. Even if the loan has not yet been executed, if the application has been submitted and the contract can be verified, the previous loan regulations will apply.

- For single-home owners under the condition of disposal, when does the six-month period for disposing of the existing home begin, and what are the penalties for violation?

▲Single-home owners under the condition of disposal must sell their existing home (complete transfer of ownership) and provide proof within six months from the date the mortgage loan is executed. For interim payment and relocation loans, the reference point is the registration date of ownership transfer for the new home. If the disposal condition is violated within six months, the benefit of the term is lost (the loan is called in immediately), and all home-related loans will be restricted for the next three years.

- Do the strengthened loan regulations, such as the 600 million won mortgage loan cap, also apply when increasing, refinancing, or extending the maturity of existing loans?

▲If the loan amount is increased or refinanced with another bank, the strengthened measures will apply. However, if the loan is simply extended without an increase in the loan amount, or if only the interest rate or maturity terms are changed, or if it is refinanced with the same bank, the previous regulations will continue to apply.

- Why are the LTV for first-time homebuyer mortgage loans being tightened and the jeonse loan limit also being reduced?

▲The relaxation of the LTV to 80% for first-time home purchases is a recent measure. This new regulation will not significantly tighten loan operations. While reducing the jeonse loan limit may cause some inconvenience, the government believes that stabilizing the housing market is more desirable.

- The maximum loan limits for newlywed couples and families with newborns will each be reduced by up to 100 million won, from 400 million won to 320 million won, and from 500 million won to 400 million won, respectively. Will this be effective?

▲(Jung Suho, Head of the Housing Fund Division at the Ministry of Land, Infrastructure and Transport) Recently, policy loans have increased indiscriminately and have been pointed out as a factor influencing rising home prices. Analysis shows that most borrowers take out 50-60% of the maximum loan limit. By reducing the maximum loan limit, the limited resources can be distributed more widely. This also aligns with the aim of encouraging borrowers to take out loans appropriate to their repayment ability.

- What is the policy loan target for this year? Is there any plan to tighten income requirements for the special loan for newborns?

▲(Jung Suho, Head of the Housing Fund Division at the Ministry of Land, Infrastructure and Transport) Last year, the total amount of policy loans was 55 trillion won, and this year’s expected figure is 45 trillion won. The goal is to ensure that genuine demand-side borrowers can continue to access funds without interruption by curbing excessive lending. Since addressing the low birth rate through newborn loans is an important national task, there are no plans to adjust income requirements.

- If the total loan management target is exceeded, will loan supply be completely suspended?

▲Financial institutions are already managing monthly and quarterly limits, and since they plan to monitor loan issuance on a daily basis going forward, it is expected that they will adjust the scale of lending autonomously as much as possible without suspending loans altogether.

- Isn’t stable housing supply, in addition to demand management, also necessary?

▲Achieving a stable balance between housing demand and supply is crucial for stabilizing the housing market. Therefore, the government will make every effort to activate housing supply so that confidence in the stable supply of sufficient housing in prime locations can ease concerns about supply-demand imbalances.

- Will additional regulated areas be designated?

▲The government will closely monitor developments in the housing market and will mobilize all available measures to stabilize the market. If necessary, additional designations of regulated areas and other stabilization measures will be actively considered and implemented.

- This is the first household debt and real estate policy measure since President Lee Jaemyung took office. During his candidacy, President Lee stated that 'it is best not to implement policies related to housing prices.' The public may feel that his stance has changed.

▲It would not be appropriate for me to comment on that.