SEOUL: The financial regulator says that the planned implementation of stricter rules on household loans will be postponed until the start of September amid various risk factors facing the financial market.

The country was originally set to implement a second phase formula for floating rate stress debt service ratio (DSR) at the start of next month.

The government “has decided through consultations with related organisations to implement the second phase of DSR from Sept 1,” the Financial Services Commission said in a statement.

The DSR measures how much a borrower has to pay for principal and interest in proportion to his or her yearly income, which serves as a ceiling on aggregate lending.

The first phase formula for DSR was implemented in February, limiting the amount of loans a person can take out to about 40% of their annual income.

Once implemented, the second phase will further reduce the amount of money each person or household can borrow.

“It is to make sure the second phase will make for a soft landing in the market,” the Financial Services Commission said of the decision to postpone the second phase implementation of DSR.

The government is taking various steps to help remove the difficulties facing small business owners and low-income earners while at the same time working on a soft land for real estate project financing loans, the Financial Services Commission added in the statement.

The new formula for DSR is scheduled to be fully implemented at the start of next year

 - ANN