[10.15 Measures] DSR Limit to Rise by 14% for 50,000 Single-Home Owners in Seoul Metropolitan Area with Jeonse Loans

ST Interest Rate Floor Raised to 3%
Mortgage Loan Limits Expected to Drop by About 10%
Only Jeonse Loan Interest Repayments Included in DSR
DSR Limit Rises by 7.4% to 14% in These Cases

Starting tomorrow (October 16), the mortgage loan limit will be differentiated based on housing prices, set at 600 million, 400 million, and 200 million won, respectively. In addition, regarding the Debt Service Ratio (DSR) regulation, the stress (ST) interest rate in regulated areas of the Seoul metropolitan area will be raised to 3%. With the increase in the ST interest rate, it is expected that the mortgage loan limit for borrowers with an annual salary between 50 million and 100 million won will decrease by 6.6% to 14.6%.

Furthermore, starting October 29, for single-home owners in regulated areas of the Seoul metropolitan area who take out a jeonse loan, the interest repayment portion will be included in the borrower's DSR calculation. As a result, about 50,000 people are expected to see their loan limits reduced by at least 6.6%.

The Financial Services Commission announced on the 15th that it held an "Emergency Household Debt Review Meeting" and decided to immediately implement measures to strengthen loan regulations in regulated areas. These include: differentiating mortgage loan limits based on housing prices; raising the stress interest rate; applying the DSR to jeonse loans for single-home owners; early implementation of higher risk weights for mortgage loans; strengthening the loan-to-value (LTV) ratio for mortgages from 70% to 40%; and imposing restrictions on jeonse loans.

Lee Eokwon, Chairman of the Financial Services Commission, attended a joint briefing on housing market stabilization measures held at the Government Seoul Office in Jongno, Seoul, on the 15th, and announced real estate measures. The announcement was attended by Deputy Prime Minister and Minister of Economy and Finance Koo Yooncheol, Minister of Land, Infrastructure and Transport Kim Yoonduk, Director of the Office for Government Policy Coordination Yoon Changryeol, and Commissioner of the National Tax Service Lim Kwanghyung. 2025.10.15 Photo by Jo Yongjun

The Financial Services Commission introduced additional regulations despite the slowdown in loan growth because it believes that expectations for the real estate market are continuing due to the base interest rate cut. Since price increases are centered on high-priced homes, the Commission explained that it is necessary to strengthen loan limits in connection with housing prices. However, to ensure that real demand for housing finance is not disrupted, the loan limit for homes priced at 1.5 billion won or less will be set at 600 million won, following the June 27 regulation.

For homes priced over 1.5 billion won up to 2.5 billion won, the loan limit will be reduced to 400 million won. This applies to upper-middle areas such as Mapo, Yongsan, and Seongdong. For homes priced over 2.5 billion won, the loan limit will be further tightened to 200 million won. This is interpreted as an effort to curb demand in areas with concentrations of high-priced homes, such as the three Gangnam districts and Yongsan.

Shin Jinchang, Director of Financial Policy at the Financial Services Commission, explained, "The main reason for implementing these strong loan regulation policies is that housing finance and mortgage loans play a certain role among the various factors driving up housing prices. At the very least, we believe we must prevent the loan side of demand from excessively driving up housing prices."

He added that if housing prices stabilize through these measures, it will become possible for ordinary people to purchase homes based on their income and appropriate earnings, thereby contributing to the stability of housing for the general public.

As part of these measures, the lower limit for the stress interest rate applied to mortgage loans in the Seoul metropolitan area and other regulated areas has been raised from 1.5% to 3% to reflect the possibility of mid- to long-term interest rate fluctuations in the DSR calculation. The Financial Services Commission expects that, on average, this will reduce the mortgage loan limit by about 10%.

Specifically, if a borrower with an annual income of 50 million won takes out a 30-year mortgage with equal principal and interest payments (assuming a 3% interest rate), the loan limit is expected to decrease by 6.6%. For a borrower with an annual income of 100 million won under the same conditions, the loan limit will decrease by 14.7%. The Commission emphasized that those affected by the reduction in loan limits are borrowers who take out mortgages close to the 40% DSR threshold.

Jeonse loans will also be subject to the DSR regulation. However, since the principal of a jeonse loan is repaid after two years, only the interest repayment portion will be included in the calculation.

If borrowers with annual incomes of 50 million won and 100 million won each take out a 200 million won jeonse loan, their DSR limit will increase by 14% and 7.4%, respectively. A Financial Services Commission official stated, "Currently, there are 52,000 cases of single-home owners in the Seoul metropolitan area taking out jeonse loans. Based on our simulation, the increase in the DSR limit due to the jeonse loan DSR regulation is approximately 14%."

Ham Youngjin, Head of the Real Estate Research Lab at Woori Bank, analyzed, "Through these real estate measures, the FOMO and panic buying demand in the Gangnam area and Han River belt of Seoul are expected to subside somewhat, and since all of Seoul has been designated as a regulated area requiring transaction approval, transactions in the fourth quarter will also decrease significantly."

However, Ham also noted, "With abundant liquidity (M2) in the market exceeding 4 quadrillion won, expectations of a base interest rate cut, and concerns over rising jeonse and monthly rent prices, it remains to be seen whether these factors will be enough to fully curb expectations of rising home prices and the purchasing demand from those without homes or those seeking to upgrade from a single home in a lower area."