South Korea tightens household loan caps, deepening credit‑access challenges

South Korean authorities have intensified total‑household‑loan‑volume management, a policy first introduced in 2021 to curb rising household debt. Under the rules, banks must keep overall loan growth within a set target, leading to periodic “loan cliffs” where credit limits are sharply reduced. For example, KB Kookmin Bank cut the maximum mortgage loan amount for home‑buyers in the capital region from 600 million won to 300 million won.

The tight caps have slowed the growth of household debt but also raised borrowing costs and pushed many borrowers toward alternative financing. Demand for online‑investment‑linked P2P loans and savings‑bank credit has surged, with deposit‑backed loan balances rising by about 7.8 trillion won this year. Card‑loan balances reached a record 43.3 trillion won. Savings banks such as Kookmin, Shinhan, Hana and others have adjusted their P2P investment volumes and tightened criteria for deposit‑backed lending in response to the regulatory pressure. The combined effect is a more constrained credit market and heightened concern among consumers and lenders about access to affordable financing.