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Exempt lending reaches record share
More than 70% of new household lending across South Korea’s financial sector was exempt from debt-service ratio rules in the second quarter, according to Bank of Korea data submitted to opposition lawmaker Oh Gi-hyoung. The estimated 70.5% share was the highest since the central bank began compiling the figures in the third quarter of 2022.
South Korea’s debt-service ratio, or DSR, rules limit borrowing based on the share of a borrower’s annual income needed to cover principal and interest payments. The share of new lending outside those limits remained in the 50% range in 2024 before rising to the low 60% range last year. It climbed from 63.9% in the first quarter of this year to 70.5% in the second.
Housing-related loans drive increase
The rise came as banks, seeking to control overall household debt, concentrated lending on essential funds tied to housing purchases and living expenses. Interim-payment and relocation loans associated with housing developments — both exempt from DSR rules — increased from 14.1% of new lending in the second quarter last year to 23.1% in the same period this year.
Loans of 100 million won or less, another exempt category, rose from 27.3% to 29.9%. Policy-directed loans increased from 2.7% to 4.5%. Loans used to finance South Korea’s lump-sum rental deposits were the only exempt category to decline, falling from 11.9% to 9.3%.
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