A Study on the Policy Effects of Stress DSR and Upward Adjustment of Risk Weight on Mortgage Loans in Korea

This study examines the effectiveness of two macroprudential policies—stress DSR and upward adjustment of risk weights—in curbing the growth of housing mortgage loans in Korea. Using panel data from major Korean banks, the analysis shows that stress DSR significantly reduces mortgage loan supply by tightening borrowers’ lending limit s, while the upward adjustment of risk weights does not have a statistically significant effect on mortgage lending. Additionally, implementing stress DSR is associated with higher lending rates and an increase in net interest margin (NIM), indicating enhanced bank profitability. Overall, the findings suggest that stress DSR is an effective measure to contain mortgage loan growth, but may lead to higher borrowing costs for consumers.