DSR Targets 6 Million People... "Additional Loan Restrictions for Low-Income People in Their 20s and 60s"

Assemblyman Kang Min-guk: "The Loan Total Volume System Should Not Lead to Restrictions on Actual Borrowers"

[Asia Economy Reporter Kwangho Lee] It is expected that about 6 million people will be affected by the significantly strengthened Debt Service Ratio (DSR) regulations for individual borrowers starting from January next year.

According to data submitted by the Financial Services Commission to Kang Ming-guk, a member of the National Assembly's Political Affairs Committee from the People Power Party, the number of borrowers subject to the individual DSR regulations next year was found to be 5.93 million. Among them, 20.9% (1.24 million) are youths aged 20 or younger or elderly people aged 60 or older.

According to the 'Strengthened Household Debt Management Plan' announced by the Financial Services Commission at the end of October, from January next year, the individual DSR regulations will apply to borrowers whose total loan amount exceeds 200 million KRW, and from July, the scope will expand to borrowers exceeding 100 million KRW.

The Financial Services Commission disclosed, based on household loan data from NICE Information Service as of the end of September, that 13.2% (780,000) of household loan borrowers have total loans exceeding 200 million KRW, and 29.8% (1.77 million) exceed 100 million KRW. Detailed numbers or age group compositions were not revealed. The total number of household loan borrowers submitted by NICE Information Service to the Financial Services Commission as of the end of September is 19.9 million.

Accordingly, as of the end of September, about 2.63 million people will be subject to individual DSR application from January next year, and in the banking sector, loans can only be obtained up to a DSR ratio of 40%. From July, 5.93 million people will be subject to the same regulation.

However, the number of eligible individuals may vary depending on the number of matured repayments and new borrowers between October and December.

Assuming a 'typical borrower' (NICE credit score 840?880, KCB credit score 796?845), if they borrow 200 million KRW in a mortgage loan with a variable interest rate, 30-year maturity, and installment repayment conditions, the monthly principal and interest repayment ranges from 1.05 million to 1.2 million KRW (annual 12.55 million to 14 million KRW), depending on the financial institution.

Within the DSR regulation criteria, the remaining principal and interest is only about 2 to 3 million KRW, making it difficult to additionally borrow 10 million KRW in unsecured loans.

Moreover, considering the current rising interest rate environment, the principal and interest for the same loan amount will increase next year.

An official from the financial authorities said, "Borrowers with mortgage loans in the hundreds of millions of KRW may face restrictions when trying to take out additional loans in the future."

In particular, those aged 20 or younger and 60 or older, who have relatively low fixed incomes, are expected to find it even harder to obtain additional loans.

Assemblyman Kang said, "With the expanded introduction of DSR regulations and continuous tightening of loan regulations such as interest rate hikes, low-income citizens and real demand borrowers are being pushed to a loan cliff," and pointed out, "The financial authorities' excessive reduction of total loan volume should not lead to excessive restrictions on real demand borrowers."

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