Discussion on Protecting Real Loan Demanders at Today's Party-Government Meeting

Ahead of the Implementation of DSR Stages 2 and 3 Next Year, Real Demand Borrowers' Loan Issues Surface

[Image source=Yonhap News]

[Asia Economy Reporter Park Sun-mi] In the party-government consultation scheduled for the morning of the 10th between the Democratic Party of Korea and the government, measures to protect actual borrowers related to household loan regulations are expected to be discussed.

According to financial and political circles on the 10th, during the closed-door party-government consultation, plans for next year's total household loan management are expected to include discussions on ways to protect actual borrowers. Park Wan-joo, the Policy Committee Chair of the Democratic Party, had previously announced that considering the increasing harm to actual borrowers due to loan restrictions and steep rises in loan interest rates, there would be discussions on protecting actual borrowers during the party-government consultation.

Starting January next year, with the application of the second stage of the Debt Service Ratio (DSR) regulation, borrowers whose total loans exceed 200 million KRW will be unable to obtain loans if their annual principal and interest repayment amount exceeds 40% of their annual income. Furthermore, jeonse loans, which were temporarily excluded from the total household loan management regulation in the fourth quarter of this year (October to December), will be included again in the regulation from January next year and thus come under management.

Within the ruling party, voices are emerging that call for regulatory easing regarding the second stage DSR regulation to be implemented from January next year, arguing that strengthened loan regulations may fail to protect actual borrowers. The Financial Services Commission also indicated that while it proposes lowering next year's total household loan management target to 4-5%, lower than this year's 5-6%, it is considering excluding loans to low- and medium-credit borrowers from the total loan volume regulation.

The Bank of Korea, through the Monetary Policy Report approved at the Financial Monetary Committee meeting the day before, forecasted that the application of the second and third stages of the DSR next year will act as a factor to curb the increase in household loans. The Bank of Korea stated, "Going forward, household loans are expected to continue the current slowing trend for the time being due to factors such as the financial sector's management of high growth rates and seasonal low demand."

However, some express concerns that discussions on regulatory easing ahead of next year's presidential election, while the tightening of household loan regulations has already slowed the loan growth trend, could potentially exacerbate confusion.

This content was produced with the assistance of AI translation services.