South Korea’s financial system remains broadly stable, but the Bank of Korea warned that Seoul metropolitan housing prices, household lending and vulnerable borrowers are deepening financial imbalances. In its Financial Stability Report released on Sept. 22, 2026, the BOK said the Financial Vulnerability Index rose 0.8 points to 46.5 in the second quarter, extending its increase to nine consecutive quarters and reaching its long-term average. It estimated that a 0.25 percentage-point base-rate increase would raise annual interest costs by about 7 trillion won ($5.2 billion), including 3.3 trillion won for households and 3.7 trillion won for businesses. The report said outstanding-balance lending rates respond most strongly about five months after a rate increase, bank delinquency rates peak after roughly 15 months and vulnerable sectors experience their largest delinquency response after about nine months. The BOK also found that stronger expected home-price gains reduce multiple-home owners’ willingness to sell, while household credit exceeded 2,000 trillion won and vulnerable self-employed borrowers continued to record substantially higher delinquency rates. It called for monetary, macroprudential and fiscal policies to operate in a complementary manner and said inflation, economic conditions and financial stability would guide the timing and pace of any additional rate increases.