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South Korean watchdog to tighten mortgage rules, curb property speculation

South Korea's financial regulator plans to impose tougher mortgage rules in designated cities as part of its efforts to curb speculative housing demand.

The Financial Services Commission said Aug. 2 it will tighten loan-to-value and debt-to-income ratios to 40% for home buyers in "bubble-prone areas" including Seoul and Busan. This lending ceiling will be applied regardless of housing type, and amount and maturity of mortgages.

However LTV and DTI ratios of 50% will be applied to first-home buyers, low-income households with annual earnings of less than 60 million won and low-price housing of less than 600 million won.

For those who own two or more homes, the regulator proposed to tighten the LTV ratio by a further 10 percentage points across the country. DTI ratios will be tightened by the same amount in the designated areas for multiple home owners.

As of Aug. 3, US$1 was equivalent to 1,127.50 South Korean won.