SEOUL, Sept. 15 (Yonhap) — Finance Minister Hong Nam-ki said Wednesday the government will explore additional measures to curb household debt, including tighter lending rules at non-banking institutions, if needed.
Hong said the country will seek to minimize the impact of lending regulations on people who try to take out loans to find houses on lease.
“The government plans to closely monitor the growth of household loans until it slows,” Hong told a government meeting on the property market.
The Financial Services Commission (FSC), the financial regulator, is reviewing ways to further tighten rules on home-backed loans in a bid to slow the growth of household debt.
Since July, the FSC has applied stricter lending calculations for mortgage loans, called the debt service ratio (DSR). The DSR measures how much a borrower has to pay in principal and interest payments in proportion to his or her yearly income.
South Korea’s housing prices have shown no signs of letting up as more people have taken out bank loans to buy homes in anticipation of higher prices despite a series of government restrictions.
Additional lending regulations are under review as people have flocked to non-banking institutions to borrow money to avoid stricter rules on bank loans.
In 2020, household debt grew 7.9 percent on-year. The regulator aims to bring the annual increase to below 6 percent this year and below 5 percent next year.
Households’ high indebtedness has been cited as the main bugbear for the South Korean economy.
Household loans extended by banks and non-banking institutions grew 8.5 trillion won (US$7.2 billion) in August, slowing from a 15.3 trillion won on-month gain in July, according to the Financial Supervisory Service (FSS).
Later this month, Hong plans to preside over a four-party meeting to discuss ways to curb household debt with Bank of Korea Gov. Lee Ju-yeol, new FSC chief Koh Seung-beom and Jeong Eun-bo, new head of the FSS.