[10.15 Measures] Tighter Lending Amid Soaring Home Prices: "Gangnam Mortgage Limit Set at 200 Million Won, DSR Applied to Jeonse Loans"

Financial Services Commission Announces Loan Demand Management Plan for Housing Market Stabilization
Mortgage Loan Limits in Regulated Areas to Be Reduced from 600 Million Won to as Low as 200 Million Won
Higher Stress Rate to Further Curb Lendi

Lee Eokwon, Chairman of the Financial Services Commission, attended the 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 Koo Yoonchul, Deputy Prime Minister and Minister of Economy and Finance, Kim Yoonduk, Minister of Land, Infrastructure and Transport, Yoon Changryul, Director of the Office for Government Policy Coordination, and Lim Kwanghyung, Commissioner of the National Tax Service. 2025.10.15 Photo by Jo Yongjun

Despite a series of regulatory measures, housing prices in key areas of Seoul and the greater metropolitan area continue to rise, prompting financial authorities to implement additional lending restrictions. The current maximum limit for mortgage loans in the metropolitan area and regulated zones, which is up to 600 million won, will now be capped at a maximum of 200 million won depending on the home price. The authorities will also raise the stress interest rate, further curbing loan availability. Due to the increase in the stress rate, individual borrowers are expected to see their loan limits decrease by around 10%.

The authorities also plan to curb gap investment demand by applying the Debt Service Ratio (DSR) to jeonse loans for single-homeowners. With this measure, the DSR for jeonse loans for single-homeowners will rise by about 14%, significantly reducing the amount they can borrow. Additionally, for newly designated regulated areas, the Loan-to-Value (LTV) ratio for first-time homebuyers taking out mortgages will be immediately tightened from 70% to 40%.

Mortgage Loan Limits in Regulated Areas to Be Differentiated by Home Price

On the morning of the 15th, the Financial Services Commission held an emergency household debt review meeting at the Government Seoul Office with the Ministry of Economy and Finance, the Ministry of Land, Infrastructure and Transport, the Financial Supervisory Service, the Bank of Korea, and other relevant agencies, unveiling the "Measures to Manage Loan Demand for Housing Market Stabilization."

Financial authorities have decided to further lower the mortgage loan limit for home purchases in the metropolitan area and regulated zones, which currently stands at 600 million won, based on the market price of the property. For homes with a market price exceeding 2.5 billion won, the loan limit will be reduced from 600 million won to 200 million won. For homes priced over 1.5 billion won up to 2.5 billion won, the limit will be set at 400 million won. As a result, those looking to purchase apartments in areas with sharply rising prices, such as Gangnam and the so-called "Mayongseong" (Mapo, Yongsan, Seongdong), will see their loan limits significantly reduced. These regulations will take effect immediately from the 16th. Shin Jinchang, Director General of Financial Policy at the Financial Services Commission, explained, "The recent rise in housing prices has been concentrated in high-priced homes, and this trend is spreading to the outskirts of Seoul. Under these circumstances, we believe it is appropriate to restrict loan limits targeting high-priced homes."

On the other hand, the mortgage loan limit for homes priced at 1.5 billion won or less will remain at the current level of 600 million won. Director Shin stated, "This loan limit regulation does not apply to buyers of homes priced at 1.5 billion won or less. This is to ensure that ordinary citizens and the middle class are not inconvenienced in purchasing homes."

The stress interest rate for mortgage loans in the metropolitan area and regulated zones will also be raised to further restrict lending. The current stress rate, which adds 1.5% to each borrower's loan rate, will be increased to 3% for these mortgages. According to the Financial Services Commission, this measure will reduce individual borrowers' loan limits by between 6.6% and 14.7%, with an average decrease of about 10%.

Director Shin emphasized, "One of the factors driving up housing prices is the expectation that interest rates will fall in the future. By raising the stress interest rate now, we aim to offset such expectations." The higher stress rate will also take effect from the 16th.

The DSR will now be applied to jeonse loans for single-homeowners in regulated areas. When individuals who already own a home take out a jeonse loan as tenants in the metropolitan area or regulated zones, only the interest portion of the jeonse loan (excluding principal) will be reflected in the borrower's DSR. The DSR regulation ensures that the total annual repayment of principal and interest on all loans does not exceed 40% of the borrower's annual income (for banks). Previously, DSR was not applied to jeonse loans, leading to concerns about a vicious cycle of rising jeonse prices, increased gap investments, and higher housing prices.

Currently, about 52,000 homeowners in regulated areas have jeonse loans. The Financial Services Commission estimates that, due to this measure, the DSR for their jeonse loans will increase by around 14%.

However, considering the potential impact on first-time homebuyers and low-income households, the authorities will first apply this measure to single-homeowners in the metropolitan area and regulated zones. They plan to consider a phased expansion depending on the implementation results. The expanded DSR application will be implemented from the 29th.

LTV in Regulated Areas Lowered from 70% to 40%

For areas newly designated as speculative or adjustment zones, the strengthened lending regulations will also take effect immediately from the 16th. As a result, first-time homebuyers (including single-homeowners under the condition of selling their existing home) taking out mortgages in regulated areas will see the LTV ratio lowered from 70% to 40%. However, if the home purchase contract was signed and the down payment paid before the effective date of the regulation (October 15), the previous rules will apply.

If a person with a jeonse loan acquires an apartment worth more than 300 million won in a speculative or overheated area, the jeonse loan will be recalled. Borrowers with unsecured loans exceeding 100 million won will be restricted from purchasing homes in regulated areas for one year from the date of loan execution. Single-homeowners in regulated areas who take out interim or relocation loans for reconstruction or redevelopment will be restricted from purchasing additional homes, and business loans for home purchases in regulated areas will also be limited. Furthermore, with the new designation of land transaction permit zones, the LTV for non-residential mortgages such as commercial properties and officetels will also be lowered from 70% to 40%.

Additionally, the Financial Services Commission will bring forward the implementation of the higher risk weight for bank mortgage loans (from 15% to 20%), which was announced last month, from the originally scheduled April next year to January. This aims to curb excessive capital inflows into the real estate market and proactively encourage the expansion of funding to businesses and capital markets, thereby promoting more productive finance at a faster pace.