Starting June 28, 2025, South Korea's government is rolling out some of the strictest housing loan regulations seen in recent years, targeting the overheated real estate market in the metropolitan area and designated regulated zones. The Financial Services Commission (FSC), alongside related ministries, announced a sweeping set of measures aimed at curbing speculative investments and managing household debt growth, which has surged alarmingly in recent months.
At the heart of these new rules is a cap on housing collateral loans (주택담보대출, or mortgage loans) for home purchases in the metropolitan and regulated areas, set firmly at 600 million won. This limit applies regardless of the borrower's income or the price of the property, marking an unprecedented move in South Korea’s financial regulation landscape. The FSC emphasized that this cap is designed to prevent excessive borrowing for high-priced homes, particularly by high-income earners such as professionals and dual-income households who have been driving up demand in areas like Gangnam and Yongsan.
Adding to the crackdown, the government has effectively banned mortgage loans for multiple homeowners purchasing additional properties. For those owning two or more homes, any attempt to acquire another property with a loan will see a loan-to-value ratio (LTV) of zero percent, meaning no mortgage loan will be granted. Similarly, one-home owners who do not dispose of their existing home within six months before buying another will face the same zero LTV restriction. If they do manage to sell their previous home within six months, they will be eligible for loans with LTVs of 70% in non-regulated areas and 50% in regulated zones, aligning with the treatment of non-homeowners.
Perhaps most significant is the imposition of a mandatory move-in obligation within six months for anyone taking out a mortgage loan in these regions. This rule aims squarely at eliminating “gap investment” (갭투자), a speculative practice where buyers use loans to purchase homes while renting them out or leveraging Jeonse (a unique Korean rental system) deposits to finance purchases. Failure to move in within the stipulated timeframe will trigger immediate loan recall and the loss of term benefits, reinforcing the government's intent to ensure loans serve genuine residential needs.
The government has extended these restrictions to policy loans as well. First-time homebuyers will see their LTV reduced from 80% to 70%, and they too must comply with the six-month move-in requirement. This change reverses previous relaxations under prior administrations, reflecting a recalibration toward tighter controls. Policy loan programs like Didimdol and Botim, designed to support housing purchases and Jeonse loans respectively, will face reduced loan limits—general Didimdol loans dropping from 250 million to 200 million won, and first-time homebuyer and youth loans from 300 million to 240 million won. Newlywed and newborn loan limits are also trimmed significantly.
Jeonse loans with ownership transfer conditions, which were often exploited for speculative investments, are now banned in metropolitan and regulated areas. The Jeonse loan guarantee rate will also be lowered from 90% to 80% starting July 21, 2025, prompting financial institutions to tighten their lending criteria further.
Loan maturities for housing collateral loans in these areas are uniformly capped at 30 years, preventing borrowers from extending repayment periods to reduce monthly burdens—a tactic that could otherwise encourage riskier borrowing and circumvent debt service ratio (DSR) regulations. Lifestyle stability loans secured by owned properties will be capped at 100 million won, with owners of two or more homes barred from accessing such loans.
These measures come amid a backdrop of soaring apartment prices in Seoul, which recently hit their highest weekly increase in nearly seven years, sparking fears of a speculative frenzy. The government’s response is a “pinpoint” strategy focused on the metropolitan and regulated zones, where price surges and loan growth have been most pronounced.
The FSC convened an emergency Household Debt Inspection Meeting on June 27, 2025, with participation from the Ministry of Economy and Finance, Ministry of Land, Infrastructure and Transport, Ministry of Interior and Safety, the Bank of Korea, the Financial Supervisory Service, the Korea Federation of Banks, and South Korea’s five major commercial banks. The meeting underscored the urgency of tackling household debt risks and stabilizing the real estate market.
In addition to the loan restrictions, the government plans to cut the total household loan target for all financial sectors by 50% from the initial plan starting July 2025, and reduce policy loan supply by 25% annually. This will likely tighten lending conditions across the board, potentially raising loan interest rates and making credit access more difficult for some borrowers. Financial authorities have committed to weekly monitoring meetings to ensure compliance and swiftly address any emerging issues.
Kwon Dae-young, Director of the FSC Secretariat, stressed the seriousness of the situation: “It is a time for proactive household debt management. We must swiftly and thoroughly implement total loan target reductions, expand autonomous management measures, and limit housing loan exposures. We are prepared to take additional actions such as expanding regulated areas, applying further DSR restrictions, and increasing risk weights on housing loans if necessary.”
Political voices have also weighed in. Jin Sung-joon, Policy Committee Chairman of the Democratic Party, urged the government to normalize lending practices and accelerate housing supply plans to address underlying demand and regional disparities. He highlighted the importance of protecting genuine homebuyers while managing financial risks.
The government is reportedly considering expanding regulated areas, including designating additional land transaction permit zones in Seoul, to further curb speculative activity. A comprehensive real estate policy package incorporating these measures is expected in the coming month.
For borrowers who had signed housing sale or Jeonse contracts or completed loan applications before June 28, grace periods will apply, allowing them to proceed under previous regulations. This is intended to protect existing borrowers and avoid undue harm to genuine buyers.
As the new rules take effect, the real estate market and financial sector face a significant shift. By imposing strict caps, mandatory residency requirements, and tightening policy loans, the government aims to cool the overheated housing market and rein in the rapid expansion of household debt. Whether these measures will successfully stabilize prices and protect borrowers without stifling genuine demand remains to be seen, but the message is clear: speculative borrowing and investment will no longer be tolerated.
