Financial Supervisory Service Governor Lee Bok-hyun speaks during a meeting with homebuyers and experts in Seoul, Wednesday. Yonhap

Internet-only banks, foreign lenders and the state-owned Industrial Bank of Korea (IBK) are joining major financial institutions in tightening their mortgage loan policies. This move follows instructions from financial authorities aimed at addressing the rapid growth of household debt.

IBK said on Wednesday that it will reduce the maximum maturity period for home mortgage loans from 40 years to 30 years, starting from Thursday. This measure effectively results in a lower loan limit.

The bank will also discontinue offering mortgage insurance, which will impose an additional burden on borrowers, who will now need to provide security deposits ranging from 25 million won ($18,600) to 55 million won. This change will also effectively reduce the available loan limits.

KakaoBank, the country's largest internet-only bank, limited its home mortgage loan eligibility to those who currently do not own homes, starting from Wednesday. The bank's maximum mortgage loan term, which was previously 50 years, has also been reduced to 30 years.

Standard Chartered (SC) Bank Korea will uniformly raise its mortgage loan interest rates by 0.2 of a percentage point, starting from Thursday. This is the first hike of the mortgage loan lates by SC Bank Korea this year.

These measures follow actions by the nation's four major banks — KB Kookmin, Shinhan, Hana and Woori — which have already taken various steps to curb the growth of mortgage loans. Their strategies include raising loan interest rates, reducing loan terms and lowering loan limits.

Customers are seen at a loan counter in a bank in Seoul, Monday. Yonhap

According to the Financial Supervisory Service (FSS), the nation's financial watchdog, the household loan balance at the four banks amounted to 517.5 trillion won as of Aug. 21. This has already surpassed the household loan balance target of 512.7 trillion won that these banks set for the end of this year.

In response to increasing pressure from authorities to tighten lending practices, NH NongHyup Bank, another major bank, plans to temporarily suspend home purchase loans for individuals who already own two or more properties in the Seoul metropolitan area. Until now, the bank has implemented only minimal adjustments to its household loan policies.

Amid the tightening regulations, homebuyers who intend to purchase homes to live in and have already signed contracts or are planning to do so are expressing concerns about their ability to secure the necessary loans.

The confusion also impacts those who have already applied for loans, as rising interest rates and shorter loan terms have led to reduced loan limits. This situation is causing increasing dissatisfaction among customers.

“Many borrowers are expressing strong opposition to the implementation of stricter loan policies,” an official at a major bank said. “In one case, a customer who owns a home in a non-regulated area faced obstacles when attempting to purchase an apartment in the Seoul metropolitan area. He expressed huge complaint.”

In response to these concerns, FSS Governor Lee Bok-hyun stated that prioritizing funds for homebuyers who intend to live in their homes, rather than for speculative purchases, could allow for better management of loans.

"This approach would ensure a continuous supply of funds to those in genuine need while controlling the overall volume of loans," Lee said during his meeting with homebuyers and experts.

“While the management of loans aimed at speculative demand should be strengthened, it is crucial to carefully manage the process to ensure that genuine loan needs arising from normal housing transactions are not unduly restricted."