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Credit unions to adopt tougher mortgage rules next month

All News 12:00 June 04, 2018

SEOUL, June 4 (Yonhap) -- Credit unions will adopt tougher guidelines for mortgage loans next month, officials said Monday, in the government's latest push to curb household debt.

The stricter lending calculation for home mortgages, named the Debt Service Ratio (DSR) by the financial authorities, uses a new system that measures all debt principal and interest payments as a proportion of annual income.

Financial authorities said the DSR system, which was adopted at commercial banks in March, better assesses a borrower's repayment ability and reduces the risk of default.

Credit unions to adopt tougher mortgage rules next month - 1

From July 23, credit unions -- member-owned financial cooperatives -- such as Nonghyup and Suhyup banks, will implement the DSR system, the Financial Services Commission (FSC) said in a statement.

Savings banks will adopt the DSR system in October, the FSC said.

South Korea's outstanding household debt jumped to a record 1,468 trillion won (US$1.36 trillion) in the January-March period, up 8 percent from a year earlier, according to preliminary data from the Bank of Korea.

The growth of household credit has slowed for five straight quarters, but FSC officials said a hike in the interest rate could increase the burdens on vulnerable borrowers.

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