SEOUL, May 30 (Korea Bizwire) – The financial regulator said Tuesday it will apply tighter rules for mortgage loans to all mutual savings institutions starting next month, in the latest step to control fast-growing household debt.
The tighter rules, which already have been applied to retail banks and other depository institutions, require borrowers to repay both interest and a part of principal until maturity.
A total of 1,925 mutual savings institutions and credit units with assets below 100 billion won (US$89 million) each will have to abide by the tighter rules starting June 1, the Financial Services Commission said in a statement.
The rules were applied to mutual savings institutions and credit unions with assets worth more than 100 billion won in March.
The nation’s household debt expansion appeared to have lost some of its steam in the first quarter of this year.
However, the first-quarter household debt still posted double-digit growth on an annual basis, making it harder for the central bank to increase its key interest rate.
Household debt jumped 11.1 percent on-year to 1,359.7 trillion won at the end of the first quarter, according to the Bank of Korea.
The first-quarter growth rate was slightly lower than the 11.6 percent on-year growth in the fourth quarter of last year.
The central bank’s benchmark interest rate is currently at a record low of 1.25 percent.