South Korea announced measures to tighten property lending in late June, although the pace of increase looked set to continue in August after gains of almost 1 percent a month in May, June and July.
"We temporarily stopped some new home-backed securities loans through the end of this month and some kinds of credit loans until further notice," said Lee Yoo-chul, a spokesman for Shinhan Bank, part of the country's third largest financial holding firm.
Two other banking sources said that they had been told to limit household lending growth to 0.6 percent month on month.
Officials from Hana Bank, part of the fourth largest financial holding firm, and agricultural bank Nonghyup confirmed the move. A Nonghyup official said they stopped some types of household lending from Wednesday that would last through the end of this month.
One of the sources said the instructions were delivered verbally instead of in writing.
Banking shares extended losses to 2.3 percent at 0345 GMT following the news, slightly outperforming the wider Kospi index which was down 2.6 percent.
Lending with property as collateral rose by 0.9 percent to an outstanding 297.3 trillion won ($277 billion) in July from a month before, based on the data from the Bank of Korea.
Household debts stand at more than 1.5 times the average annual disposable income, next only to Britain among major countries in the Organization for Economic Co-operation and Development (OECD).
A lengthy property boom, low interest rates and competition among banks eager to do more retail lending have driven a personal loans spree. Property backed loans account for almost 70 percent of the total.
Economists say that any bursting of the lending bubble is now the biggest risk to South Korea's economy as borrowing has been used to sustain consumption and to invest in higher-yielding securities, like stocks.
"To me, this move is another step on ongoing process to curb household debt but nothing more than that," said Koo Kyung-hoe, a Hyundai Securities analyst.
"I think banks are doing this after seeing a sharp rise (in lending) in early August."
At the end of June, the distressed loan ratio of total home-backed loans was just 0.48 percent at domestic banks, compared with a total bad loan ratio of 1.73 percent, according to the Financial Supervisory Service. Woori Bank spokesman Jang Chung-sik said the bank would apply tighter screening for household loans rather than directly halting lending to households.
A Kookmin Bank official said it was monitoring actions by rival banks, though it has not decided to join the move.
The Financial Services Commission, the industry watchdog, denied it had issued any new rules in writing or verbally.
