South Korea's financial regulator said Wednesday it will considering making more money available for long-term fixed-rate loans after borrowers gobbled up a new government-backed loan scheme from the first day of its launch.

More than 40,000 people have signed on with local banks to convert their short-term floating-rate mortgage loans into longer, fixed-rate loans introduced by the government to rein in ballooning household debt, according to the Financial Services Commission.  The amount of money that switched over came to 4.9 trillion won ($4.4 billion) as of Tuesday evening, hitting the monthly ceiling of 5 trillion won  in just a day.

The FSC said it will not apply the monthly limit and allow switchovers until it runs out of the 20 trillion won set aside for the loan program this year. 

"If the amount of loan extension reaches its limit of 20 trillion won for this year, we will outline plans to create an additional fund for the loan conversion as soon as possible," said an FSC official. "We will set the size of the supplementary fund after closely looking into the loans' sale, demand and effects in cooperating with the finance ministry and the Bank of Korea."

The Korea Housing Finance Corp. is playing a major role in creating the fund, issuing mortgage-backed securities and getting 200 billion won from the BOK.

The Seoul government is trying to manage household debt that totaled 1,089 trillion won as of end-December. Such loans are feared to hurt the health of household finances, affecting consumption and demand. They have stayed over the 1,000 trillion level since surpassing the line in mid-2014.

The growth pace of household debt was expected to pick up further as the central bank cut the key policy rate to a record low of 1.75 percent in March, a 0.75 percentage point drop from July.

The regulator has been encouraging local lenders to offer new instruments that help debtors convert floating-rate loans to fixed-rate amortized loans so that the borrowers can pay back the principal instead of just the interest.

The new government-backed loans went on sale Tuesday with a 2.53-2.75 percent rate range, lower than the average fixed-rate mortgage loans with a 3.09-3.49 percent range offered by local banks.

Those who borrowed 200 million won from a bank at a rate of 3.7 percent last year are expected to save some 170,000 won every month after changing to the new loan program. (Yonhap)