South Korea implements Mortgage loan ban for multi-homeowners to combat household debt crisis and housing crisis

Starting tomorrow, homebuyers in the Seoul metropolitan area and other regulated zones will no longer be able to take out mortgage loans exceeding 600 million KRW. Multi-homeowners in these areas will be completely banned from obtaining mortgages, and buyers who do take out mortgages will be required to move into the purchased property within six months, effectively blocking access to credit for non-end users.

At the same time, the government is cutting the total cap on household lending in the financial sector by half, as part of its attempt to rein in soaring real estate prices.

On the 27th, the Financial Services Commission (FSC), led by Executive Secretary Kwon Dae-young, held an Emergency Household Debt Inspection Meeting and announced the strongest-ever tightening of real estate lending regulations. The government’s move comes in response to panic-driven homebuying, especially in Seoul, where apartment prices rose 0.43% this week, the largest jump in nearly seven years.

The centerpiece of the measures is a hard cap on mortgage loans used for purchasing homes in the capital region and regulated zones. Regardless of income or home price, the maximum amount of mortgage loan allowed will be 600 million KRW. The FSC described this as an unprecedented move to curb excessive borrowing for high-priced property purchases.

Previously, banks had discretion in limiting loans to multi-homeowners or for “gap investments” (buying a property while renting it out to tenants). These restrictions will now be formally codified. The core objective is to prohibit lending for speculative, non-residential home purchases.

For those who already own two or more homes in regulated areas, mortgage loans for additional purchases will be entirely blocked, with the Loan-to-Value (LTV) ratio set at 0%.

Even single-homeowners purchasing a second home without first selling their current residence will be blocked unless they sell the first property within six months—a tighter deadline than the previous two-year condition. Only then will they qualify for LTV of 50% in regulated areas or 70% in non-regulated areas.

Conditional jeonse loans (used for tenant deposit-based housing) tied to gap investment will also be banned.

To prevent borrowers from bypassing DSR (Debt Service Ratio) rules, mortgage loan maturities will be standardized at 30 years across all banks.

Mortgages taken out for living expense stabilization will be capped at 1 billion KRW, and unsecured credit loans used to purchase homes will be limited to within the borrower’s annual income.

Furthermore, borrowers who use mortgages to purchase homes in regulated areas will face a mandatory move-in requirement within six months. This rule also applies to state-backed mortgage programs such as Bogeumjari Loans.

These strict measures apply only to the capital region and regulated zones, leaving local (non-regulated) housing markets under different conditions.

Even first-time homebuyers are not exempt. The LTV ratio for first-time buyers in regulated areas will be reduced from 80% to 70%. Additionally, the maximum loan limit for Didimdol (home purchase) and Burtimmok (jeonse support) loans—major components of the housing fund policy loan programs—will be reduced by up to 100 million KRW, depending on borrower type.

Jeonse loan guarantees will also be reduced, from the current 90% to 80%.

The total household loan quota for financial institutions for the second half of 2025 will be cut to 50% of previously planned levels.

Policy loans such as Didimdol, Burtimmok, and Bogeumjari will also be reduced, though more moderately—by 25%, in recognition of their role in supporting low-income and vulnerable groups.

To prevent a rush of last-minute borrowing before implementation, the FSC will enforce all new restrictions starting June 28.

The commission also pledged to conduct on-site inspections of banks to monitor compliance and will hold weekly debt oversight meetings moving forward.

Executive Secretary Kwon stated that the government would mobilize all available tools to respond to market overheating.

“If necessary,” he said, “we will immediately implement further measures, including tightening LTV in regulated zones, expanding DSR rules to cover jeonse and policy loans, and raising risk weights for mortgage loans.”

The government is also actively considering designating new regulated areas depending on market conditions.