Korea's 40% DSR Is Not in the Statute — the Three Documents That Set It

“DSR 40%” is quoted so often in Korea that it sounds like a figure written into an Act. It is not. Article 34 of the Banking Act says only that a bank “shall maintain soundness of management”. Below it, a supervisory regulation pushes the number into an appended table, and then pushes the method of computing it to the Governor of the Financial Supervisory Service. Getting to the number means changing documents three times.

Understanding that stack explains two things borrowers keep running into — why the limit moves every time a policy package lands, and why an online calculator and the bank’s screen disagree.

The article, read straight

Regulation on Supervision of Banking Business, article 29-2 (risk management for housing-related collateralised lending)
(1) When handling housing-related collateralised loans, a bank shall, pursuant to article 34 of the Act and so as to maintain soundness of management, comply with the loan-to-value ratio, the debt-to-income ratio, the debt service ratio and other restrictions on the handling and extension of housing-secured loans set out in appended table 6.
(2) Where the Governor deems it urgent in light of a bank’s soundness of management, the Governor may adjust the loan-to-value ratio, the debt-to-income ratio and the debt service ratio set out in appended table 6 within a range of 10 percentage points. In such case the Governor shall report the matter to the Commission without delay.
(3) The method of computing those ratios and the detailed criteria for the scope of application, and other detailed matters concerning restrictions on handling and extension, shall be as determined by the Governor.

The “where deemed urgent” proviso limits paragraph 2, but the point stands: there is a second lever below the Commission. And in practice the bigger one is paragraph 3 — the method sits in the rulebook, and that is where it is settled which loans get converted to which term before they are counted.

Today the figures are 40% and 50%

The Financial Services Commission states them in a single footnote.

FSC, FAQ on the 15 October housing market measures, note 3 — “Financial-sector lending is subject to DSR regulation (40% at banks, 50% at non-banks, the same in regulated areas)”.

The easy phrase to skip is “the same in regulated areas”. Designating an area tightens several rules at once — DSR is not among them. The tightening happens on other axes.

The same document keeps first-time buyers at 70% LTV even in regulated areas and lower-income owner-occupiers at 60%. That second category requires combined household income of KRW 90m or less, a house price of KRW 800m or less, and being a homeless householder — all three. Clearing DSR is not the end of it, which is the point of this table. The full buying sequence is in the order to check before buying, and the taxes at acquisition are in the property tax calculator.

Stress DSR — a rate you never pay, cutting a limit you do

The Commission describes it as “imposing an add-on rate when DSR is computed, in view of the possibility that repayment burden rises through the life of the loan if rates increase”. A companion document adds, in brackets, “not charged on the actual loan rate”.

Stage 3 carries two conditions. Credit loans attract the add-on only where the balance exceeds KRW 100m, and mortgages outside Seoul, Gyeonggi and Incheon take the stage-2 figure of 0.75%. Separately, group loans whose occupant recruitment notice issued by 30 June 2025 and ordinary mortgages with a sale contract signed by that date stay on the previous stage-2 rules. The contract date is what decides which regime applies — and there is one such transitional rule per stage, four in all, collected below under “The contract date decides the regime”.

Then in October 2025, the capital area went up again

The table above is the position as at July 2025. Four months later the 15 October package raised the stress rate on capital-area and regulated-zone mortgages from 1.5% to 3.0%. So it is no longer one number but three. The Commission's operating guidance for the second half of 2026 states the final rate as stress rate × base application ratio × loan-type ratio, and splits the first two like this.

It runs 1 July to 31 December 2026, with the same figures as the column for the rate currently in force. So 0.75% on regional mortgages did not end in 2025 — it is still live, though the reason changed: not “the stage-2 figure applied temporarily” but 1.5% multiplied by a 50% base ratio. The 3.0% is not retroactive: loans drawn before the effective date keep the rate that applied when they were drawn.

There is one more branch: the longer the fixed-rate period, the smaller the share of the add-on applied. It exists to push lending toward genuinely fixed products, and it is the third term in the formula above. The ratios were raised at stage 3; transcribed from the May 2025 release:

※ Left of each arrow is stage 2, right is the stage-3 figure. Mortgages outside the capital area and the regulated zones take the stage-2 ratios here too. The table is as published on 20 May 2025, and checking it against the attachment to the guidance in force shows the same figures for the second half of 2026 — the attachment is set out below under “How the stress rate is actually made”.

The upshot: a variable-rate capital-area mortgage carries the most — 3.0% multiplied by 100% and 100% again. At the other end, fixing for 70% or more of the term means the add-on does not apply at all. Choosing between fixed and variable is easier to settle by putting total interest side by side in the loan repayment calculator.

These figures come from administrative guidance

Go looking for the source at this point and most people hit a wall: there is no “H2 2026 stress DSR operating direction” among the FSC’s press releases. The last release actually titled “half-year stress DSR operating direction” is dated 25 June 2024.

It is not missing — it is filed somewhere else. These figures are set by administrative guidance, and guidance comes in two parts: a notice and the guidance in force. Both sit in the financial regulation portal (better.fsc.go.kr), not the newsroom.

The document’s identity, how to reach it and its table 1 are set out separately in the H2 2026 operating direction. What actually binds is the second row. Note the reference: 2024-002. A new document is not issued each time — one piece of guidance made in 2024 keeps being “amended and re-issued” with a fresh validity window. Hence a 2024 number carrying the second half of 2026.

Nor does it rest on one rulebook. The guidance in force lists five: the supervisory regulations for banking, insurance, mutual savings banks, mutual finance and specialised credit finance. We went through the other four and opened all five appended tables — where the “50% for non-banks” is actually written is set out just below.

Which adds a layer to the three above. The ratios sit in appended table 6 of the supervisory regulation, the arithmetic in the supervisor’s rulebook, and the stress rate in guidance reissued every half year. The first two change by amendment; guidance changes by notice alone. That is why this particular number seems to move so often.

How the stress rate is actually made

We opened the attachment. It is “260701_stage 3 stress DSR amended guidance” (posted 30 June 2026), two pages, hanging off the guidance in force — the same file this article had been recording as unopened. What it holds is where the 3.0% and the 1.5% come from.

The method the attachment sets out:

• Compute “the highest rate of the past five years − the rate now”, twice a year (June and December), where “now” is the May and November figure. The benchmark is the weighted average rate on new household lending at deposit-taking banks (Bank of Korea).
• Then a floor: 3.0% or more for capital-area and regulated-zone mortgages (officetels included), and a 1.5% to 3.0% range for everything else.
• And mortgages outside those areas take the step-1 rate × 50%, to 31 December 2026. Table 1 above puts the regional stress rate at 1.5%, which reads back as 3.0% at step 1 this half-year — though that is us lining the two documents up; where the attachment writes “3.0%” itself is the floor in step 2.

One wording correction while we are here. Press releases say “regional”; the attachment says “outside the capital area and the regulated zones” — and a property inside the capital area but not in a regulated zone can fall differently under the two phrasings. The attachment is the document that binds.

The mixed and periodic-reset ratio table transcribed earlier turns out to match the attachment exactly: the May 2025 figures still stand for the second half of 2026. The same footnote rides with it — “mortgages outside the capital area and regulated zones take the stage-2 ratios”, to 31 December 2026.

The contract date decides the regime — four transitional rules

Page 2 of the attachment collects the transitional rule attached to each stage on one sheet. They share a shape: if you signed a sale contract and can evidence payment of the deposit by the date, or the site’s occupant recruitment notice had issued, then a completion loan drawn afterwards is still judged under the previous rules.

This article had carried only the stage-3 row. The one that bites more often in practice is the last: contract signed and deposit paid by 15 October 2025 keeps you on the pre-package rules. That is the package that took capital-area mortgages from 1.5% to 3.0% — so the same flat at the same bank can carry double the stress rate on the strength of one date on a contract.

※ For non-residential property the date is the sales advertisement; where there is no occupant-recruitment notice or sales advertisement, the construction-start filing; for members of a redevelopment or reconstruction association, the management-disposal authorisation; and for housing under the land-transaction permit system, the date the permit application was filed with the local authority.

The same structure repeats five times

So we opened the other four. The finding is almost anticlimactic — each sector carries what is effectively the same article as banking’s 29-2, with the numbers changed.

The three paragraphs say the same thing in each: (1) comply with the LTV, DTI and DSR set in the appended table; (2) the supervisor may move them within 10 percentage points, reporting to the Commission without delay; (3) the method of calculation and the detailed criteria are left to the supervisor. Not merely similar drafting — one article copied five times, all five amended on 1 September 2022.

Open the appended table and the figures are there

The article goes only as far as “comply with the appended table”. So where does the number live? We opened the tables. They looked download-only on the national law portal, but the appended-table viewer renders the text on screen — we read all five.

The banking passage reads:

Regulation on Supervision of Banking Business, appended table 6, chapter 4 (debt service ratio), item 4(a)
Where a bank extends household credit to a borrower whose total lending exceeds KRW 100 million (including the amount applied for; for facility lines, the facility amount), it shall do so within a debt service ratio not exceeding 40%.

The mutual finance table reads “a credit co-operative shall … not exceed 50%”, marked amended 1 September 2022. Savings banks, insurers and credit finance companies carry the identical sentence with only the subject changed. That is where “50% for non-banks” comes from — not one rule but the same sentence written separately into four appended tables.

One point worth pulling out. The 40% and 50% bite only on borrowers whose total debt exceeds KRW 100m. Press releases and FAQs give the bare “40% at banks, 50% at non-banks”, but all five tables attach the same threshold, counting the amount applied for and, for facility lines, the full facility.

The tables also list what is left out of the calculation: debt assumed unavoidably through inheritance or an enforcement sale, changes of terms made to ease a borrower’s repayment burden, interim-payment loans on pre-sold homes, relocation loans and additional-contribution interim payments in redevelopment, the same items for non-residential property, and anything else the FSS Governor recognises. But an excluded loan comes back as existing debt when the next loan is counted (amended 5 March 2025).

And one more. A borrower who evidences an urgent living-expenses purpose, undertakes to use the money within that purpose and obtains credit-committee approval may take a mortgage above the ratio, up to KRW 150 million. That too is in the table, not the article.

What changed in 2026

The Commission’s 2026 household debt management plan, published on 1 April 2026, left the DSR ratios alone. It pulled other levers instead.

• Volume targets — household lending growth for 2026 is capped at 1.5%, below the 1.7% actually recorded in 2025 and less than half the forecast nominal growth rate. In practice: your DSR can clear and the loan can still not appear, because the bank’s own annual allowance is full.
• A separate mortgage target — newly introduced, to stop lenders shrinking other lending in order to grow mortgages.
• No routine extension for multiple-home owners — mortgages on apartments in the capital region and regulated areas are in principle not extended at maturity, with exceptions including where a tenant is in place (in force 17 April 2026).
• Wider DSR coverage signalled — both that plan and the May review record “expanding the scope of DSR” as work in progress. Signalled, not in force.

The plan also cuts policy lending from about 30% of the total to around 20% in stages. Read plainly, the channels with looser DSR treatment or separate ceilings are narrowing. What banks currently charge on jeonse lending is measured bank by bank in the jeonse loan rate article.

Which is why calculators disagree

Because article 29-2(3) hands the method to the supervisor, three things are absent from the regulation itself.

• What term credit and other loans are converted to. Not the contractual term but a set period. Change that figure and the same balance eats a completely different share of DSR.
• When an excluded loan is counted again. The exclusion list itself is in the appended table (interim payments, relocation loans, inherited debt) — but such a loan returns as existing debt when the next loan is sized. Where a calculator puts that step changes the answer.
• How income is recognised. Documented, imputed or declared income — and at what figure — changes the denominator.

That is why our DSR calculator leaves the assessed term as a box you can change. The figure is not in the appended table but in the supervisor’s rulebook (Banking Supervision Detailed Rules, appended table 18, table 3), which we opened on 18 September and transcribed in the calculator article — an instalment credit loan counts over its contract term (5–10 years), any other credit loan over 5 years, and an overdraft line at its full limit. Because the same “credit loan” splits by repayment type, the box is left open. Where people actually get the arithmetic wrong is set out with figures in the common DSR mistakes.

Where readers usually get stuck

Is a loan refused outright above 40%?

The regulation says “shall comply”. Paragraph 2 opens a ±10 point adjustment for the supervisor, and the appended table sets out its own exceptions — interim payments, relocation loans and inherited debt may be left out, and an urgent living-expenses case can exceed the ratio up to KRW 150m with credit-committee approval. And below KRW 100m of total debt the 40% does not attach at all.

Do I pay the stress rate?

No. The Commission’s own bracket says “not charged on the actual loan rate”. The rate is inflated only while the limit is being sized.

Does a regulated area tighten DSR?

No. The FSC FAQ says “the same in regulated areas”. What tightens is LTV, DTI and the cap by house price.

Can I get 50% by going to a non-bank?

The ratio is 50% at non-banks, yes — written in identical wording into insurance table 21, savings-bank table 5, mutual-finance table 2 and specialised-credit table 3. But the rate is correspondingly higher, and the 2026 plan hardened sector-by-sector volume targets — one mutual credit body was given a 2026 target of zero net growth after overshooting. A higher ratio and an available loan are not the same thing.

The ratio is in a table, the arithmetic is in a rulebook, and the power to adjust sits with the supervisor. Once you can see the three layers, the question stops being “why did it change again” and becomes “which layer moved”.

Sources

• Korea Ministry of Government Legislation — administrative rule — Regulation on Supervision of Banking Business, article 29-2. The quotations here are the rule text itself, and three things were confirmed from it: that appended table 6 sets the ratios, that the supervisor may move them 10 percentage points, and that the method of computation is delegated to the supervisor.
• Ministry of Government Legislation — the four other supervisory regulations — Insurance art. 7-5-2 · Mutual savings bank art. 39-2 · Mutual finance art. 16-4 · Specialised credit art. 11-2. Each carries the same three paragraphs as banking’s 29-2, all amended 1 September 2022.
• Ministry of Government Legislation — the five appended tables — banking table 6, insurance 21, savings banks 5, mutual finance 2, specialised credit 3, each at chapter 4, “debt service ratio”. Source for 40% at banks and 50% at the other four, the KRW 100m threshold, the list of excluded loans, and the KRW 150m urgent-living-expenses exception. The quotation is the table text itself.
• Financial Services Commission — policy Q&A — FAQ on the 15 October housing market measures. Source for “40% at banks, 50% at non-banks, the same in regulated areas”, and for the LTV, DTI, price-band caps and the first-time-buyer and owner-occupier categories.
• Financial Services Commission — press release — stage 3 stress DSR confirmed. Source for the stage-by-stage scope and rate table, the KRW 100m credit-loan threshold, the regional treatment, the mixed and periodic-reset ratio table, the carve-out for group loans and sale contracts dated by 30 June, and “not charged on the actual loan rate”.
• Financial Services Commission administrative guidance — the notice is “Stage 3 stress DSR — notice of amended administrative guidance” (FSC notice 2026-362, 18 June 2026); the guidance in force is “Stress DSR”, amended (reference 2024-002, valid 1 July to 31 December 2026). From the “stress DSR operating direction for H2 2026”, table 1: Source for 3.0% on capital-area and regulated-zone mortgages at a 100% base ratio, 1.5% at 50% for regional mortgages, 1.5% at 100% for everything else, and the formula “final rate = stress rate × base application ratio × loan-type ratio”, running 1 July to 31 December 2026. These figures are set by administrative guidance, not a press release — which is why they are absent from the FSC’s press-release listing and sit instead in the financial regulation portal (better.fsc.go.kr), issued under article 9 of the Regulation on Financial Regulatory Operation.
• FSC administrative guidance — the attachment to the guidance in force, “260701_stage 3 stress DSR amended guidance” (posted 30 June 2026, two pages). Source for how the stress rate is computed (five-year high minus the current rate, twice a year in June and December, against the Bank of Korea’s weighted average rate on new household lending), 3.0% or more for capital-area and regulated-zone mortgages and 1.5–3.0% for the rest, the × 50% for mortgages outside those areas, the mixed and periodic-reset ratio table (identical to the May 2025 figures), the KRW 100m credit-loan threshold, officetel-secured loans following the mortgage method, and the four transitional rules.
• Financial Services Commission — policy — 2026 household debt management plan. Source for the 1.5% growth target, the new separate mortgage target, the maturity-extension restriction from 17 April 2026, the cut in policy lending from 30% toward 20%, and the signalled expansion of DSR coverage.

Where to check further

• The supervisor’s rulebook — the method of computation. After the articles and the five appended tables, we read appended table 18, table 3, and items 12-1 and 12-2 (income recognition) on 18 September; the figures are in the DSR calculator article. What remains is which row of table 3 your loan falls in — whether it meets the “instalment” definition (no grace period, instalments of 40% or more of the total) depends on the loan agreement.
• The stress rate after 2026. The figures above come from guidance running to 31 December 2026 and are set half-year by half-year — when the year turns, look for the next administrative guidance notice rather than a press release (financial regulation portal → administrative guidance).
• The ratio that actually attaches to your loan. The table above has been checked against the attachment — what remains is what share of your term is fixed-rate, and therefore which column you land in. Your bank can tell you per product, and bringing the date on your contract answers the transitional question at the same time.
• The detail of the DSR expansion. Recorded only as work in progress — watch the Commission’s work reports and releases.

Written as at August 2026. The stress rates are those in the operating guidance for the second half of 2026 (1 July – 31 December). The quotations from the supervisory regulation are the rule text as published, and the ratios and stress rates were read directly from Financial Services Commission documents. Appended table 6 (the sector ratios) was read in all five supervisory regulations, and the supervisor’s rulebook was read on 18 September 2026 as far as appended table 18, table 3, transcribed in the DSR calculator article (this paragraph corrected on 22 September 2026 — the earlier version said neither had been read, contradicting “where to check further” above). DSR rules move with each package of measures — confirm with the bank immediately before you draw down. This is general information, not financial advice.