The country's financial regulator said Wednesday it may adopt more enhanced criteria on home loans should the measures fail to curb the rising of such loans. Starting in September, the tightened curbs will be applied to mortgage loans so that new mortgage borrowers will be able to take out loans smaller than before under the tightened criteria. Since February this year, the first-stage debt service ratio (DSR) has been applied to mortgages extended by banks. Beginning in September, the more tightened DSR will be extended to mortgages issued by banks and non-banking financial institutions. The stress debt service ratio (DSR), which measures how much a borrower has to pay for principal and interest in proportion to his or her yearly income, serves as a ceiling on aggregate lending. In particular, the second-stage DSR will be more strictly applied to mortgages in the capital Seoul and the greater Seoul area, where home prices have been soaring amid a tight supply. The Financial Services Commission (FSC) s aid the second-stage DSR may be applied to policy loans and loans for home rental, called "jeonse" here. Also, the regulator may raise risk weights on mortgage loans, which prod banks to reduce home-backed loans to maintain their capital adequacy ratios. According to the sources, the country's top five lenders had already extended 4.18 trillion won (US$3.12 billion) in household loans, mostly home-backed loans, in the first 14 days of this month. In the second quarter of the year, outstanding household credit reached 1,896.2 trillion won, up 13.8 trillion won from three months earlier, rebounding from the previous quarter's 3.1 trillion-won fall, according to the central bank data. Policymakers remained worried over a spike in household debts, which could sap further private spending. Borrowing costs in Asia's fourth-largest economy remain high following the BOK's aggressive monetary tightening aimed at bringing surging inflation under control. Last month, the central bank held its key interest rate ste ady at 3.5 percent for the 12th straight time amid moderating inflation and high household debt. The rate freezes came after the BOK delivered seven consecutive rate hikes from April 2022 to January. The central bank is widely expected to stand pat this week again. Source: Yonhap News Agency
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