Banks will continue to apply the step 2 stress DSR to home mortgage loans outside the capital region in the second half of this year. Mortgages in the Seoul metropolitan area and in regulated zones are subject to the step 3 standard. Regional mortgages will keep the current method of applying a more relaxed stress interest rate.

The Korea Federation of Banks said on Monday that banks will apply the step 2 stress DSR to regional mortgages from July 1 to Dec. 31, the same as now, following the implementation of changes to the Financial Services Commission's administrative guidance on stress DSR.

As a result, regional mortgages will be subject to a lower base stress-rate application ratio and loan-type application ratios than those under the step 3 stress DSR.

Mortgages in the Seoul metropolitan area and in regulated zones will have a 3.0 percent stress interest rate and a step 3 base application ratio of 100 percent applied.

Regional mortgages outside regulated zones will have a 1.5 percent stress interest rate and a step 2 base application ratio of 50 percent applied.

Loans excluding mortgages, such as unsecured credit loans and other loans, will have a 1.5 percent stress interest rate and a step 3 base application ratio of 100 percent applied. Stress DSR will apply to unsecured credit loans only when the total outstanding loan balance exceeds 100 million won.

The final applicable interest rate is calculated by multiplying the stress interest rate by the base application ratio and the loan-type application ratio. The loan-type application ratio varies depending on the interest rate structure, such as floating, mixed and periodic, and on the share of the fixed-rate period or the interest rate reset cycle.

Banks plan to reflect stress DSR application standards by region and loan type in new loan screenings in the second half of this year under the operating plan.