Banks tighten curbs on mortgage loans amid worries over rising home prices in Seoul

Banks in South Korea started tightening curbs on mortgage loans on Sunday, officials said, amid concerns over rising housing prices in Seoul and household debts.

The move came as the Financial Services Commission asked banks to toughen screenings for new mortgage borrowers and to reduce the size of loans available under the tightened criteria.

The stress debt service ratio (DSR), which measures how much a borrower has to pay for principal and interest in proportion to their yearly income, serves as a ceiling on aggregate lending.

The tougher rules were originally set to be applied to banks in July but were delayed by two months.

Household credit rebounded sharply in the second quarter of this year as home-backed loans increased despite tightened lending criteria and high rates.

Outstanding household credit reached 1,896.2 trillion won ($1.419 trillion) at the end of June, up 13.8 trillion won from three months earlier, according to preliminary data from the Bank of Korea.

The second quarter marked a rebound from the previous quarter's 3.1 trillion-won decline, according to the data. (Yonhap)