South Korean banks and other lenders will be required to apply very strict debt-to-income (DTI) ratios starting next year.

South Korea's Financial Services Commission on Sunday announced a set of measures to tighten mortgage rules and curb snowballing household debts.

The tougher DTI ratio requirement will be applied to state-designated speculative zones, Seoul and the capital region. The banks will more accurately screen and assess a borrower's repayment capability, which will make it more difficult to buy homes on big mortgages.

The government expects eight-point-three percent of potential borrowers in the affected areas will be subject to the stricter requirement, pulling down the growth of housing mortgage loans by point-16 percentage point.

The stricter lending rule for home mortgages, named the Debt Service Ratio (DSR), will be introduced for first-tier banks in the fourth quarter next year and other lenders in the second half of 2019.

The new DSR ratio will measure the principle and interest payments of a mortgage borrower's all existing loans as a proportion of their annual income.