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Planned start of stricter rules on household loans to be postponed until September

June 25, 2024 - 09:29 By Yonhap
This photo, taken Jun. 17, shows a sign about a bank's home-backed loan program on the exterior of the lender in Seoul. (Yonhap)

The financial regulator said Tuesday that the planned implementation of stricter rules on household loans will be postponed until the start of September amid various risk factors facing the financial market.

The country was originally set to implement a second phase formula for floating rate stress debt service ratio (DSR) at the start of next month.

The government "has decided through consultations with related organizations to implement the second phase DSR steps from Sept. 1," the Financial Services Commission said in a press release.

DSR measures how much a borrower has to pay for principal and interest in proportion to his or her yearly income, which serves as a ceiling on aggregate lending.

The first phase formula for DSR was implemented in February, limiting the amount of loans a person can take out to about 40 percent of their annual income.

The second phase steps, once implemented, will further reduce the amount of money each person or household can borrow.

"It is to make sure the second phase steps will make a soft landing in the market, as the government is taking various steps to help remove difficulties facing small business owners and low-income earners while working to soft land real estate project financing loans," the FSC said of the decision to postpone the second phase implementation of DSR.

The new formula for DSR is scheduled to be fully implemented from the start of next year. (Yonhap)