If you are planning to buy a home or comparing loan products, one term always comes up: the loan-to-value ratio (LTV). First I explain what it means, and then I sum up the LTV issues, centered on the Maeil Business Newspaper's reporting of June 12, 2025.
1. What LTV means
The loan-to-value ratio (LTV) is the share of an asset's value that is recognized when you borrow money using a home as collateral.
For example, if the home used as collateral is worth 1 billion won and the LTV is set at 60%, you can borrow up to 600 million won.
The government adjusts the level of lending regulation by raising or lowering the LTV ratio. Raising it increases loan limits and serves as a policy to encourage lending; lowering it serves as a regulatory policy to tighten lending.
2. Major LTV news on June 12, 2025
2.1 "Deadline for 'LTV collusion' responses looms… banks ask for a six-week extension"
- Summary
The Korea Fair Trade Commission alleges that the four largest banks, KB Kookmin, Shinhan, Hana and Woori, colluded on loan-to-value ratios and plans to impose large fines. The report says the banks asked for another six-week extension of the deadline for submitting their responses. - Details
- The original response deadline of May 9 had already been extended once, to June 20, at the banks' request
- The banks plan to formally ask the commission to extend the deadline again, to August 1
- The final sanctions decision is expected in the second half of the year (mk.co.kr)
2.2 "Four big banks, tense over a 1 trillion won fine, ask to delay LTV responses"
- Summary
Because the commission is considering fines of up to around 1 trillion won over the alleged LTV collusion, the banks are asking for more time to submit their responses so they can prepare their legal arguments. - Key points
- The case is proceeding amid the Lee Jae-myung government's push to strengthen the Fair Trade Commission's powers
- The banks argue that sharing LTV information was customary risk management
- The final fine is expected to be a yardstick for how hard the new government's "fair economy" policy will press financial companies (mk.co.kr)
3. ✍️ Wrapping up
What LTV regulation means
LTV is a key tool for curbing or easing excessive growth in household lending. Mortgage loans are considered lower risk than other loans, yet by adjusting LTV limits on them the authorities manage the stability of the whole financial system.
The fallout from the collusion allegations
The allegations against the banks matter beyond the size of any fine: they put trust in the financial market and its risk management practices on the chopping block. Under the new government's fair-economy drive, sanctions are likely to be tough, which could serve as a warning to other financial companies as well.
Outlook
The Fair Trade Commission's final decision: depending on the level of sanctions announced in the second half, banks' risk management practices are likely to be fully reviewed.
Changes in LTV policy: while keeping its stance on managing household debt, the government still has room to adjust LTV limits to boost domestic demand.
What investors and borrowers should do: as loan limits become uncertain, the timing of home purchases and financial planning will matter even more for people buying homes to live in.