South Korea's financial authorities have decided to extend the postponement of applying the Stage 3 stress debt service ratio (DSR) to regional mortgages until the end of this year.
The Financial Services Commission (FSC) said Wednesday that it would extend the postponement of the Stage 3 stress DSR on regional mortgages, scheduled to end later this month, by an additional six months.
The stress DSR is a system that calculates loan limits by adding a premium rate, known as the stress rate, to the lending rate. When Stage 3 is applied, regulations tighten, raising lending rates and reducing loan limits. The FSC explained that the decision "took into account the revitalization of regional housing markets."
Financial authorities began applying the Stage 3 stress DSR to the Seoul metropolitan area in July last year, but have delayed its application to regional areas over the past year, considering the prolonged downturn in the property market. In addition, although the increase in household loan balances at financial institutions has been growing, the authorities appear to have judged that imposing additional regulations on regional mortgages would yield little benefit, given that the trend has been largely influenced by stock investment demand and housing transactions in the Seoul metropolitan area.
As a result, the current Stage 2 stress DSR will continue to apply to regional mortgages until the end of the year. Currently, a stress rate of 3.0 percent is applied to mortgages in the Seoul metropolitan area and regulated zones, while regional areas are subject to the Stage 2 level of 0.75 percent.
