South Korean banks are tightening their lending standards for jeonse-related loans following government directives to reduce overall household debt. Although intended to rein in soaring home prices, the move has led to a sharp drop in jeonse listings and a continued rise in jeonse prices across the Seoul metropolitan area since the government unveiled a new housing policy package on June 27.
Choi, a 46-year-old resident of Songdo in Incheon, recently applied for landlord financing to repay jeonse deposits to departing tenants. She submitted applications to major commercial banks, National Agricultural Cooperative Federation, and MG Community Credit Cooperatives—only to be rejected by all of them. These loans are typically used by landlords to refund security deposits when lease terms expire. Currently staying with her husband, three children, and mother at her parents’ home, Choi had planned to move back into one of her two rental apartments after returning a 500 million won ($360,000) deposit to the current tenant by the end of the month. “Ever since the June 27 measures, the banks have completely shut down lending,” she said.
Under the new rules laid out in the June 27 real estate policy package, the Financial Services Commission capped jeonse deposit repayment loans at 100 million won ($72,000) per case, while stating that the limit would not be applied retroactively to existing lease agreements. Nonetheless, banks have begun tightening internal screening standards in line with the broader policy direction, creating mounting difficulties for borrowers like Choi. A senior official at the financial authority said the retroactive application of the cap “is not in line with government policy” and emphasized that “loan screening remains at the banks’ discretion.” However, commercial banks argue they have little choice but to impose stricter lending rules until more detailed guidelines are issued by the government.
The volume of jeonse lending by banks continues to shrink. According to financial industry officials on August 5, Industrial Bank of Korea (IBK) suspended all new applications for mortgage and jeonse loans through loan brokers starting the previous day. Hana Bank also halted broker-based applications for mortgage and jeonse loans scheduled for disbursement in September. NH Nonghyup Bank has already exhausted its broker-assigned quota for housing loans through September.
Despite potential profit losses, banks are scaling back lending in response to regulatory pressure. Financial authorities have instructed the five major commercial banks to limit the growth of household loans in the second half of 2025 to 3.6 trillion won ($2.6 billion)—half the previously approved target of 7.2 trillion won. In some cases, banks have gone beyond government guidance by preemptively adopting even more stringent internal lending criteria.
Shinhan Bank, for example, has suspended jeonse loans for gap investors—buyers who purchase homes with existing jeonse tenants—through October across the country. The measure expands what had initially been a restriction applied only in the Seoul metropolitan area under the June 27 policy package to a nationwide ban. KB Kookmin Bank and Woori Bank have also implemented the measure nationwide. A government official said the nationwide expansion “was not coordinated with the administration,” but banks maintain that it is necessary to meet the government’s target for reducing total household lending.
As access to jeonse loans becomes more restricted, rental activity in Seoul is slowing while jeonse prices continue to climb. Tenants unable to secure financing are turning to monthly rent contracts, while the decline in gap investment—once a key source of jeonse supply—is further tightening the rental market. According to the Seoul city’s realty information plaza website, the number of apartment jeonse transactions in the capital dropped to 9,546 in July, down 21% from 12,120 in June. The figure had consistently stayed above 12,000 per month since April before falling sharply after the policy shift.
The average jeonse price for apartments in Seoul has increased for three consecutive months, rising from 575.49 million won ($410,000) in April to 616.92 million won ($440,000) in July.
Park Hap-soo, an adjunct professor at Konkuk University’s graduate school of real estate, warned that tougher jeonse lending restrictions aimed at curbing gap investment could end up hurting low- to middle-income tenants. “When jeonse contracts are converted to semi-jeonse or monthly rent, housing costs rise, which could undercut the government’s broader strategy to stimulate domestic consumption,” he said.