Seoul: South Korea's financial regulator announced it is prepared to enforce stricter limitations on household debt growth if necessary, as recent measures have begun to contain the rapid increase in loans this month. The Financial Services Commission (FSC) observed a slowdown in household loan growth following a series of interventions introduced late last month.
According to Yonhap News Agency, the FSC indicated its commitment to monitor the progression of home-backed loan growth and is ready to implement additional measures to manage loan growth if required. In June, household loans surged by 6.2 trillion won (approximately US$4.5 billion) compared to the previous month, representing the largest monthly increase since August 2024.
In response to the rising debt, the government imposed tighter mortgage regulations, including a cap on home-backed loans for purchases in the capital region at 600 million won and a suspension of such loans for multi-home owners. During the first ten days of this month, household loans from five major lenders reached 755.7 trillion won, an increase of 891.2 billion won from the end of June, with a daily increase of 89.1 billion won in July, down from a daily gain of 225.1 billion won in June.
Earlier this month, South Korea's central bank maintained its benchmark interest rate at 2.5 percent, opting for a cautious stance amidst concerns over rapidly increasing housing prices and household debts. The decision came after a rate cut in May, when the Bank of Korea reduced the policy rate by 25 basis points to bolster economic growth in the face of weak domestic demand and uncertainty due to the United States' extensive tariff measures.