Drops Across the Board... Mortgage Loan Rates to Decrease Starting Tomorrow

[Asia Economy Reporter Kim Min-young] The COFIX (Cost of Funds Index), which serves as the benchmark for variable-rate mortgage loan interest rates in the banking sector, has collectively declined.

According to the Bankers Association on the 16th, the COFIX based on new transaction amounts last month was 1.26%, down 0.17 percentage points from the previous month. This marks the fourth consecutive month of decline.

The drop was significant. It is the largest decrease in 7 years and 8 months since July 2012 (0.22 percentage points).

The decline in the COFIX based on new transaction amounts was influenced by major commercial banks consecutively lowering deposit interest rates. Additionally, the new balance-based COFIX also fell by 0.06 percentage points to 1.38%. This marks the eighth consecutive month of decline since its first announcement on July 15 last year. The existing balance-based COFIX (1.66%) also dropped by 0.06 percentage points, falling for 12 consecutive months.

COFIX refers to the weighted average interest rate of funds raised by eight major commercial banks including Shinhan, KB Kookmin, KEB Hana, and Woori Bank. When banks raise or lower interest rates on deposit products such as actual deposits, savings, and bank bonds, COFIX rises or falls accordingly.

The balance-based COFIX includes fixed deposits, installment savings, mutual installment savings, housing installment savings, negotiable certificates of deposit, repurchase agreements, commercial paper sales, and financial bonds (excluding subordinated bonds and convertible bonds).

The new balance-based COFIX adds other deposits, borrowings, and settlement funds to the products covered by the existing balance-based COFIX.

While the new and existing balance-based COFIX generally reflect market interest rate changes gradually, the COFIX based on new transaction amounts is calculated based on funds newly raised during the month, thus reflecting market interest rate changes more quickly.

For customers who have already taken out variable-rate mortgage loans, if the additional interest rate and preferential interest rate remain unchanged, the loan interest rate moves by the amount of change in the COFIX that was used as the benchmark at the time of the initial loan.

This content was produced with the assistance of AI translation services.