Household Debt Management: Aggregate Growth Target Set at 1.5% by 2026
The Financial Services Commission (FSC) announced a household debt management plan on the 1st, setting the growth rate for household loans at 1.5% for 2026. The aggregate management target of 1.5% is lower than the actual growth rate of 1.7% for household loans in the financial sector last year. For Saemaul Undong Credit Cooperatives, which exceeded their management target by four times last year, their target for this year has been set at '+0 won', allowing new loans only up to the amount of refunded funds.
A key element of this plan is the restriction on loan extensions for multi-home owners. For those owning apartments in the Seoul metropolitan area and regulated zones, the extension of their mortgage loans will be prohibited in principle starting from the 17th of this month. An exception will be made if a tenant is residing in the property, allowing loan extensions until the end of the lease agreement signed as of April 1st. According to the FSC, lump-sum repayment mortgages for multi-home owners amount to approximately 17,000 households worth KRW 4.1 trillion. Of this, about 12,000 households, or KRW 2.7 trillion, are set to mature this year. The restriction on loan extensions will take effect on the 17th of this month after a preparation period for financial institutions, with existing regulations applying to loans maturing before this date.
Authorities are also significantly strengthening regulations against the misuse of business loans for purposes other than those intended. The existing penalties for fund diversion, previously applicable only to business loans, will be expanded to cover all household loans. The period of prohibition for new loans upon detection will also be extended from a maximum of 5 years to a maximum of 10 years. Notably, a comprehensive review will be conducted on the use of business loans issued since 2021 to detect any instances of misuse.
Peer-to-peer (P2P) lending, which had raised concerns of a balloon effect due to the absence of Loan-to-Value (LTV) regulations, has also been included in this plan. LTV regulations will be mandated for P2P housing-backed loans, which were previously subject to self-regulation, and loan limits will be applied based on housing price brackets. For homes valued up to KRW 1.5 billion, a limit of KRW 600 million will be imposed; for homes between KRW 1.5 billion and KRW 2.5 billion, the limit will be KRW 400 million; and for homes exceeding KRW 2.5 billion, the limit will be KRW 200 million.
FSC Chairman Lee Bok-hyun emphasized, "Speculative loan demand leveraging is continuously flowing into the real estate market, stimulating the housing market. To break this vicious cycle and shed the stigma of being a 'nation-ruining real estate republic,' a decisive separation of real estate and finance is desperately needed."