South Korea's financial authorities will raise this year's target for the growth rate of total household loans to around 3 percent from the existing 1.5 percent. The size of financial support for housing supply will also be expanded to 47.8 trillion won plus alpha from 26.3 trillion won.

The Financial Services Commission on Wednesday announced a "comprehensive financial package to stabilise the real estate market" containing those measures.

The core of the package is to expand support for housing supply and funding for young people and end-users, while maintaining the existing stance on managing household loans.

First, the growth rate of total household debt this year will be adjusted to around 3 percent from the initial 1.5 percent. The FSC plans to use the expanded lending capacity to promote housing supply, stabilise youth housing and ease funding difficulties for end-users.

Mortgage loans related to housing supply, such as relocation loans for reconstruction and redevelopment sites and interim and balance payment loans for newly built complexes, will be managed separately from financial firms' overall volume management targets. Detailed management methods will be applied in the second half of this year after consultation with the financial sector.

Financial support for housing supply will be expanded to 47.8 trillion won plus alpha from 26.3 trillion won.

The supply of project financing guarantees by the Korea Housing Finance Corp and the Housing and Urban Guarantee Corp (HUG) will be increased to an annual average of 28.7 trillion won over the next three years, with 33.0 trillion won supplied on a focused basis in 2027.

Support to normalise distressed project sites, including KAMCO's PF normalisation support fund and PF syndicated loans by the financial sector, will also be expanded.

The basic framework of real estate lending curbs will remain in place. The FSC will keep applying LTV limits of 40 percent in regulated areas and 70 percent in non-regulated areas, and DSR limits of 40 percent for banks and 50 percent for non-bank financial institutions. Mortgage loan caps by home price will also remain at current levels.

Some rules on jeonse loans will be tightened. From January next year, new jeonse loans and maturity extensions will in principle be restricted for single-home owners who own apartments in the Seoul metropolitan area or regulated areas, lease out those homes, and have no history of living in them for both the owner and spouse. The guarantee ratio for jeonse loans for single-home owners will also be lowered by 10 percentage points at a time.

Policy financing support for young people and newlyweds will also be expanded. The government will introduce a "Youth Future Bogeumjari Loan" for young people aged 39 or younger and a combined guarantee for monthly rent and jeonse, and it will ease the income requirement for newlywed Bogeumjari loans so that they can be used even when one spouse has annual income of 70 million won or less.