“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.
1. Where is it written? Article 29-2 of the Regulation on Supervision of Banking Business says banks “shall comply with the loan-to-value ratio, debt-to-income ratio and debt service ratio set out in appended table 6”. The number lives in the table, not the article.
2. Is it fixed? No. Paragraph 2 of the same article lets the supervisor adjust those ratios by up to 10 percentage points.
3. Who decides the arithmetic? Paragraph 3: “the method of computation and the detailed criteria for the scope of application shall be as determined by the Governor”. Which is exactly why calculators 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.
| Level | What it fixes | Who can change it |
|---|---|---|
| Banking Act art. 34 | “Soundness of management” — no figure | The legislature |
| Supervisory regulation art. 29-2 | The duty to comply with LTV, DTI, DSR | Commission resolution |
| Appended table 6 | The ratios themselves | Commission resolution |
| Art. 29-2(2) | Supervisor may move them ±10 points | Supervisor, reporting after |
| Supervisor’s rulebook | Method and detailed criteria | Supervisor |
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.
| Measure | Unregulated (capital region) | Regulated area |
|---|---|---|
| LTV (ordinary borrower) | 70% | 40% |
| DTI (apartments) | 60% | Adjustment target area 50% · speculation-overheated 40% |
| Hard cap on a mortgage | KRW 600m | Up to 1.5bn: 600m · 1.5–2.5bn: 400m · above: 200m |
| DSR | 40% banks · 50% non-banks | Unchanged |
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 | 1 (Feb 2024) | 2 (Sep 2024) | 3 (1 Jul 2025) |
|---|---|---|---|
| Banks — scope | Mortgages | Mortgages + credit loans | Mortgages + credit + other |
| Non-banks | — | Mortgages | Same |
| Stress rate | 0.38% | 0.75% (1.20% for capital-region bank mortgages) | 1.50% (0.75% for regional mortgages) |
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 keep the stage-2 figure of 0.75% on a temporary basis. As announced, that concession ran to the end of 2025, and we could not confirm from a primary document what followed.
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 the ratios for mixed and periodic-reset mortgages were raised at stage 3. Choosing between fixed and variable is easier to settle by putting total interest side by side in the loan repayment calculator.
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.
- Which loans are excluded or treated differently. Jeonse loans, interim payments, relocation loans and policy microfinance among them.
- 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. Hard-coding it would make the output look like the answer, and the answer lives in a document we could not read. 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”. But paragraph 2 opens a ±10 point adjustment for the supervisor, and certain loan types are treated differently in the computation. The exception list sits in the rulebook, which we could not read.
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. 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.
- 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 temporary regional treatment, and “not charged on the actual loan rate”.
- 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 ratios in appended table 6, and the supervisor’s rulebook. We read as far as the article — the appended tables on the Ministry of Government Legislation site and the Financial Supervisory Service carry the computation method itself.
- Whether 0.75% still applies to regional mortgages. Announced through the end of 2025; we could not confirm what came after — check the FSC press releases.
- 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 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. We could not read appended table 6 or the supervisor’s rulebook, so nothing inside them is asserted here. DSR rules move with each package of measures — confirm with the bank immediately before you draw down. This is general information, not financial advice.
