"Did Banks Tighten Too Much?" Total Lending Cap Falters Over Balance Payment Loans... Will the Government Adjust the 1.5% Target?

Lee Okwon Says "Banks Tightened Further," Exposing Contradictions in Lending Rules

Financial Services Commission Estimates Scale of Final Payment Loans and Net Increase in Household Lending

Expansion of Household Loan Cap Also Under Review

"Final payment loans can be obtained within the regulatory framework, but the banks have tightened the rules even further."

Following a statement by Lee Eogwon, Chairman of the Financial Services Commission, at the National Assembly on July 28, attention is focusing on the government’s real estate loan policy, which is expected to be announced next week, as the contradictions of the current aggregate household loan control policy are increasingly coming to light. While financial authorities are facing criticism for virtually blocking final payment loans through stringent aggregate limits and shifting responsibility to the banks, they have left the door open to expanding this year’s household loan growth target and are currently reviewing additional measures.

Lee Eokwon, Chairman of the Financial Services Commission, is giving a business report at the entire meeting of the Political Affairs Committee held in the National Assembly on the 29th. July 29, 2026 Photo by Hyunmin Kim

As of July 31, according to financial authorities, the Financial Services Commission is working with banks to estimate both the demand for final payment loans at project sites scheduled for occupancy in the second half of the year and the actual net increase in household loans. Based on these projections, they will decide whether to maintain the current aggregate control, partially exclude final payment loans from the cap, or raise the target for household loan growth in 2026 above the current 1.5% level.

The key issue is how much final payment loans will actually increase household lending. Apartment purchase payments in Korea are generally structured as 10% down payment, 60% interim payment, and 30% final payment. Since a significant portion of final payment loans are used to repay or convert existing interim payment loans—already reflected in household loan statistics—financial authorities argue that not all final payment loans should be counted as a net increase in new household lending.

Some predict that final payment loan volume could reach as high as 26 trillion won in the second half of the year, but financial authorities believe the actual net increase will be much lower. However, given that the increase is still expected to be in the trillion-won range, it is inevitable that there will be disruptions in loan supply if the current aggregate cap is maintained.

In reality, banks are already finding it difficult to issue additional loans because of the aggregate control. Under the current 1.5% aggregate cap for this year, net new household lending by the top five commercial banks has already surpassed the set limit of 4.33 trillion won. As a result, there is virtually no capacity left for new loans.

There is a growing consensus that revising the current aggregate control policy is unavoidable. Whether the authorities remove final payment loans from the cap or raise the 1.5% target, such moves ultimately amount to an easing of the overall restrictions. Authorities are also considering making exceptions to the aggregate limits for practical demand from groups such as young people and low-income earners.

Chairman Lee’s recent remarks at the National Assembly have also been seen as exposing the limitations of the aggregate control policy. Since President Lee Jaemyung instructed authorities on July 23 to resolve the final payment loan issue and supplementary measures are being prepared, critics argue that assigning blame to banks ignores the reality that loan limits have already been exhausted under the cap.

The Financial Services Commission had initially planned to announce its new real estate loan policy this week, but has postponed the announcement to next week. The measures are expected to include relaxation of policies for group loans such as final payment and relocation loans, loans for practical demand from young people and low-income earners, and tightened restrictions on loans for non-resident owners of a single home. However, since additional adjustments are still being made, there is a possibility the announcement will be delayed further.

A financial industry official stated, "With final payment loans now constrained by the heightened aggregate control, it has become inevitable for the government to revise its loan policies." The source added, "To minimize side effects in the market, it is necessary to shift policies in a way that realistically adjusts the total loan limit."

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