South Korea to Expand Loan Curbs on Multi-Homeowners; Installment Mortgages Also in Scope

The Financial Services Commission is expected to announce steps as early as the end of this month to tighten lending rules not only for rental business operators but also for individual multi-homeowners. Beyond denying extensions, regulators are weighing measures such as blocking refinancing and encouraging higher borrowing costs, signaling a broad push to rein in multi-homeowner lending. 

According to data provided by the office of Rep. Kim Hyun-jung of the Democratic Party, a member of the National Assembly’s Political Affairs Committee, mortgages held by individual multi-homeowners at the four major banks — KB Kookmin, Shinhan, Hana and Woori — totaled 63.7 trillion won as of the end of January. The amount represents a meaningful share of household lending, making market impact likely if new restrictions take effect.

By repayment type, installment loans accounted for 96% (61 trillion won), while interest-only, lump-sum repayment at maturity made up 4% (2.5 trillion won). Shinhan Bank and Hana Bank reported no such lump-sum loans. KB Kookmin Bank and Woori Bank had only a small share, about 5% to 10%.

That breakdown is drawing attention to whether the FSC will also target installment mortgages held by individual multi-homeowners. Even if regulators stop short of the toughest measures for individuals immediately, they could broaden the scope to manage multi-homeowner lending more comprehensively. Analysts say expanding rules beyond rental business operators to individual multi-homeowners would raise the overall policy intensity.

One option under discussion would curb a strategy used by some borrowers who keep 30-year loans but switch to lower-rate products after three years, when prepayment fees are waived, to reduce interest costs. Regulators could also consider steps that encourage banks to raise add-on rates, increasing borrowing costs for multi-homeowners more broadly.

For lump-sum repayment loans, regulators are expected to consider denying maturity extensions. An FSC official said, “The main axis of this regulation is rental business operators, but it will also include rules for individual multi-homeowners.” 

The FSC is also expected to announce additional measures for rental business operators. As of January, their outstanding bank loan balance totaled 258.5 trillion won. Unlike individual multi-homeowners, rental business operators had a much higher share of lump-sum repayment loans, at 88%, exceeding installment loans. The FSC is reviewing whether to apply a 0% loan-to-value rule — previously limited to new loans — at the time of maturity extensions as well.

If the FSC rolls out multi-homeowner lending curbs alongside overall household lending caps by the end of the month, pressure on financial firms is expected to increase. Blocking maturity extensions could raise borrowers’ repayment burdens and fuel concerns about higher delinquency rates. At the same time, tighter household lending limits could reduce capacity for new loans.

A financial industry official said, “With concerns growing about a domestic slowdown as Middle East risks drag on, strong regulations could quickly expand delinquency rates,” adding, “The president has also mentioned tax adjustments as a last-resort regulatory tool, making changes to lending strategy unavoidable.”