With the April 1 measures banning mortgage extensions for multi-home owners, approximately 7,500 housing units in regulated areas alone are expected to hit the market this year.
According to financial industry sources on Monday, the Financial Services Commission (FSC) is launching working groups in three areas — non-resident single-home owners, debt service ratio (DSR), and risk-weighted assets (RWA) — to review additional household loan regulations.
The FSC will first move to close gaps in DSR coverage, including jeonse (lump-sum deposit lease) loans and policy loans. Although the FSC brought some jeonse loans under DSR rules in October last year, only interest payments are counted for single-home owners, prompting expectations of further action. Authorities are also reviewing plans to expand DSR calculations to include interest payments on high-value jeonse loans for non-homeowners and to bring small loans of 100 million won or less under the regulation.
RWA rules aimed at reducing bank lending will also be tightened. Financial authorities raised the RWA floor on new mortgage loans from 15% to 20% in September last year. The annual reduction in mortgage lending from that move was estimated at 27 trillion won. The working groups are expected to discuss raising the floor to 25% and imposing additional capital charges on high-value mortgages.
Regulations on non-resident single-home owners will be strengthened as well. Restricting public guarantees on jeonse loans has been floated as a way to block speculative demand from those not residing in their properties. However, setting criteria to distinguish speculative intent is expected to take time, as many owners live elsewhere for unavoidable reasons such as workplace location.
The FSC plans to hold a working-level meeting with the banking sector on Wednesday to discuss market trends since the April 1 measures and the direction of additional regulations. Under the measures, mortgage extensions for multi-home owners of apartments in the Seoul metropolitan area and regulated zones will be banned starting April 17. An estimated 12,000 households — representing 2.7 trillion won — face loan maturities this year. Of those, 7,500 households, or 62.5%, are in regulated areas. "The authorities are tightening household lending on all fronts," a financial industry official said. "But regulations on non-resident single-home owners are likely to spark significant debate."
