Household debt measures could be announced next week by FSC

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Household debt measures could be announced next week by FSC

Korea's financial regulator is expected to announce additional measures next week to tame runaway household debt that will focus on toughening requirements for the repayment capability of borrowers, sources said Wednesday.
 
The measures will be part of efforts to rein in fast-growing household debt and prevent it from weighing on the country's overall economic recovery from the fallout of the coronavirus pandemic.
 
According to the sources, the Financial Services Commission (FSC) is planning to unveil a set of measures aimed at taming household debt on Tuesday next week.
 
Earlier, Finance Minister Hong Nam-ki told lawmakers that preparations are "in the final stage" to put forth measures to curb household debt, adding that emphasis will be placed on toughening regulations on mortgages through the debt service ratio (DSR).
 
DSR measures how much a borrower has to pay in principal and interest in proportion to income. The stricter application of the ratio can lead to a decline in fresh loans.
 
Since July, the FSC has applied a 40-percent DSR ratio on borrowers who buy a home costing more than 600 million won ($512,000) in speculation-prone regions, expanding those subject to the restrictions in taking out home-backed loans.
 
In addition, the financial regulator plans to apply the rule to borrowers who have an outstanding loan of more than 200 million won from July next year, and the rule will be applied to borrowers who have an outstanding loan of more than 100 million won from a year later.
 
Observers said that the FSC will likely speed up the schedule for the introduction of the stricter rules when it unveils additional measures on household debt next week.
 
The regulator, however, is likely to ease regulations on loans for home rentals amid growing complaints that the recently toughened loan regulations have made it hard for renters to borrow money.
 
On Thursday, President Moon Jae-in ordered financial authorities to closely monitor banks to ensure a smooth supply of loans for home rentals. 
 
Yonhap
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