South Korea Caps Metropolitan Mortgage Loans At Six Hundred Million

Starting June 28, 2025, South Korea is implementing sweeping new regulations to tighten mortgage lending in the metropolitan and designated regulated areas, marking one of the most stringent crackdowns on household debt in recent years. The government’s bold measures aim to curb soaring housing prices and speculative buying, particularly in Seoul’s high-demand districts, by restricting how much individuals can borrow against their homes and limiting loans for multiple homeowners.

At the heart of these new rules is a hard cap on mortgage loans in the metropolitan area and regulated zones such as Seoul’s Gangnam, Seocho, Songpa, and Yongsan districts. From next week, the maximum mortgage loan amount will be limited to 600 million Korean won (approximately $480,000), regardless of income or home price. This unprecedented ceiling replaces the previous system, which did not impose an aggregate limit on mortgage loans, allowing some buyers to leverage extensive credit to fund high-value property purchases.

Multiple homeowners face an even tougher restriction: new mortgage loans will be completely prohibited for individuals owning two or more homes in these areas. This “LTV 0%” rule means that additional mortgage borrowing is blocked outright, a move designed to deter speculative investments and “gap investing” — where buyers exploit loan products to profit from price differences between purchase and rental deposits.

For first-time homebuyers in the metropolitan and regulated areas, the government is tightening the Loan-to-Value (LTV) ratio, reducing it from 80% to 70%. This means buyers can borrow less relative to the property’s value, increasing the required down payment and cooling demand. Moreover, a new six-month move-in obligation will be imposed, requiring buyers who take out mortgage loans to reside in their new homes within half a year. This rule also applies to policy loans such as the popular Didimdol purchase loan and Bogeumjari loan, ensuring that these financial products serve genuine residential needs rather than investment speculation.

Credit loans, often used to supplement mortgage financing, will also face stricter limits. Previously, banks allowed credit loans up to one to two times a borrower’s annual income, but from July 4, 2025, credit loans will be capped strictly at the borrower’s annual income. This measure targets the practice known colloquially as “yeonggeul,” or borrowing to the hilt, where buyers max out all available credit to afford homes.

The government’s efforts extend beyond loan amounts and eligibility. Mortgage loan maturities, which varied by bank and could extend up to 40 years, will now be standardized to a maximum of 30 years within the metropolitan and regulated areas. This change aims to prevent borrowers from circumventing Debt Service Ratio (DSR) regulations, which assess borrowers’ ability to repay debts by considering the total repayment burden relative to income. Shorter loan terms mean higher monthly payments, encouraging more prudent borrowing.

Jeonse loans—mortgage loans for lump-sum rental deposits—are also being restricted. In metropolitan and regulated areas, loans on properties where ownership has changed will be banned, and the guarantee ratio for Jeonse loans will be lowered from 90% to 80%, prompting financial institutions to tighten credit screening. These steps seek to prevent the use of Jeonse loans for speculative purposes and reduce systemic risks.

To further limit the use of loans for non-residential purposes, the government has capped mortgage loans taken out for living expenses secured by property at 100 million won. This cap applies in metropolitan and regulated areas, while banks retain discretion over limits for properties outside these zones.

The new regulations also include a significant reduction in the overall household debt growth targets. The total household debt management goal for the second half of 2025 has been cut by 50% compared to earlier plans. Policy loan supplies, including Didimdol and Butimok loans, will be reduced by 25% relative to annual supply plans. These reductions reflect the government’s commitment to aggressively rein in the rapid expansion of household debt amid rising home prices.

To ensure smooth implementation and minimize sudden surges in loan demand, the Financial Supervisory Service (FSS) will immediately apply feasible measures following the announcement. Administrative steps requiring further coordination will be expedited. Meanwhile, exceptions have been carved out for borrowers who signed property sale or rental contracts or completed loan applications before the new rules take effect, safeguarding existing borrowers’ interests and protecting genuine homebuyers from unintended consequences.

The government’s coordinated approach involved multiple agencies, including the Ministry of Economy and Finance, Ministry of Land, Infrastructure and Transport, Ministry of the Interior and Safety, Bank of Korea, Financial Services Commission (FSC), and the Financial Supervisory Service, alongside major banks. At the emergency household debt review meeting on June 27, 2025, Kwon Dae-young, Secretary-General of the Financial Services Commission, stressed the urgency of proactive debt management. He urged all financial sectors to swiftly and thoroughly implement the new measures, stating, “Now is the time to manage household debt with extraordinary resolve.”

He also warned that additional steps might be taken if necessary, including further tightening of LTV ratios in regulated areas, expanding DSR regulations to cover Jeonse and policy loans, and increasing risk weights for mortgage loans. The government is prepared to designate more regulated areas if market conditions warrant such action.

The crackdown comes amid a backdrop of soaring home prices, with Seoul’s apartment prices rising 0.43% in the week leading up to June 23, 2025—the highest increase in nearly seven years—fueling fears of panic buying. Data from real estate platforms showed that in the first four months of 2025, high-end districts like Gangnam, Seocho, and Songpa recorded 1,633 transactions setting new price records, roughly 25 times the number of such transactions in lower-priced northern Seoul districts.

These developments prompted the government to take what many describe as an “ultra-high-intensity” approach to household debt regulation, aiming to cool the overheated housing market and reduce financial risks linked to excessive borrowing.

In summary, South Korea’s new mortgage lending regulations from June 28, 2025, mark a decisive shift toward tighter credit controls in the metropolitan area. By capping mortgage amounts, restricting loans for multiple homeowners, lowering LTV ratios for first-time buyers, imposing move-in obligations, and reducing credit loan limits, the government is signaling its determination to curb speculative buying and stabilize the housing market. These measures, combined with enhanced monitoring and the possibility of further tightening, underscore the seriousness with which authorities view household debt as a systemic risk requiring swift and comprehensive action.