A pedestrian passes by banners promoting mortgage products in front of a bank in Seoul, Sunday. Yonhap

Financial authorities in Korea are signaling a strong intention to intervene in the management of household loans, as such debts have grown to an alarming level in recent months following a rise in real estate prices.

The authorities have already been working to tighten lending regulations gradually by implementing stricter debt service ratio (DSR) rules. The second phase of implementation is scheduled for Sunday, after the first phase took effect in February.

They are warning that if the sharp increase in household debt does not subside, they will introduce more stringent measures in addition to the second phase of the DSR regulations.

"Regarding (the growth of) housing prices in the Seoul metropolitan area, we strongly feel the need for intervention," Lee Bok-hyun, the governor of the Financial Supervisory Service (FSS), said during his TV appearance on Sunday.

"Previously, we have intervened less in terms of bank autonomy, but given the situation in the real estate market, it seems we need to take tougher actions moving forward. We are internally considering even stronger measures if the trend of increasing loans continues after September."

According to government sources, tougher actions being discussed include lowering the DSR limit, which currently restricts debt repayment to 40 percent of annual income.

"Spending 40 percent of one's income on loan principal and interest payments is excessively high," a senior FSS official noted. "We will encourage banks to strengthen their own DSR management first."

Additionally, the authorities are considering eliminating the grace period for mortgages and reinstating stricter LTV regulations that determine the loan-to-value ratio for housing prices.

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Such discussions are underway due to lingering concerns that the growing household debt, which has been led by a rise in mortgages, is putting pressure on the country's economy.

According to industry officials, the outstanding balance of mortgages at the five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — reached 559.7 trillion won ($422 billion) as of July, an increase of 7.6 trillion won compared to June. The July increase is the largest monthly increase since January 2016, when related statistics became available for the five major banks.

There is a high likelihood that this record will be broken this month. As of Thursday, the outstanding balance of mortgages at the five major banks already reached 565.9 trillion won, an increase of 6.1 trillion won compared to July. If this pace continues, the increase in August could surpass the level seen in July.

The surge in those loans is attributed to a combination of factors, including rising housing prices in the Seoul metropolitan area and increased transactions following the easing of real estate regulations.

During a recent meeting to review household loans, the financial authorities instructed the five major banks to implement comprehensive measures for managing household debt in addition to raising interest rates. This directive is interpreted as a call not only for the passive approach of increasing interest rates but also for the active measure of tightening loan assessments.

Banks are planning to introduce diverse measures to restrict mortgages. KB Kookmin Bank plans to shorten the maximum mortgage term to 30 years from 50 years for homes located in the Seoul metropolitan area. Shinhan Bank will restrict some loans for jeonse lease for the time being, on the expectation that it will discourage those borrowing money from making speculative investments in real estate.