Finance Minister Hong Nam-ki on Monday raised the need to strengthen the monitoring of the property market as the latest rate hike and the talks of US tapering could increase market volatility.

The minister also called for ways to encourage the private sector to take part in the government's efforts to increase the home supply.

"There is a need to strengthen the monitoring of the housing market due to changes in real estate market conditions," Hong told a meeting with senior government officials.

The minister referred to the rate hike by the Bank of Korea (BOK), the government's housing policy, the country's tighter rules on home-backed loans and the possibility of the Federal Reserve's tapering of bond buying.

South Korea's housing prices have shown no signs of letting up as more people have taken out bank loans to buy homes in anticipation of higher prices despite a series of government restrictions.

In August, the BOK raised the benchmark interest rate by a quarter percentage point to 0.75 percent from a record low of 0.5 percent, marking the first pandemic-era rate hike.

BOK Gov. Lee Ju-yeol hinted that the central bank may again raise the key rate this year or early next year. A rate hike could increase debt-servicing burdens of households.

The Financial Services Commission (FSC) is reviewing ways to further tighten rules on home-backed loans in a bid to slow the growth of household debt.

Since July, the FSC has applied stricter lending calculations for mortgage loans, called the debt service ratio (DSR).

In 2020, household debt grew 7.9 percent on-year. The regulator aims to bring the annual increase to below 6 percent this year and below 5 percent next year.

Outstanding bank loans to local households came to 1,046.3 trillion won ($890 billion) as of end-August, up 6.2 trillion won from the previous month, according to central bank data. (Yonhap)