The banking sector will face tighter loan regulations from next week.

Starting Wednesday, the lending calculation for home mortgages, named the Debt Service Ratio(DSR), will be more strictly managed.

This new system measures all debt principal and interest payments as a proportion of annual income. 

If the DSR, the ratio of debt to income, surpasses 70 percent, this will be classified as a loan carrying risk. Over 90 percent will be considered a high-risk loan.

Commercial banks must keep the portion of risky loans at no more than 15 percent and high-risk loans below ten percent.

In the case of a Rent to Interest(RTI) ratio involving rental income earners, an exception that permitted loan approvals to be given to unqualified people will be scrapped.

The new DSR regulations will initially be tested on a trial basis at savings backs, credit card firms and other credit agencies but mandatory obligations won't apply.