Bank Mortgage Loan Interest Rates at All-Time Low Levels

Impact of COFIX Decline, Major Banks' Mortgage Loan Rates Fall
Fixed Rates Based on 5-Year Financial Bonds Also at Bottom Level

[Asia Economy Reporter Kim Min-young] As the COFIX (Cost of Funds Index), which serves as the benchmark for variable-rate mortgage loan interest rates in the banking sector, continues to decline, the mortgage loan interest rates at major commercial banks are also falling to historically low levels.

According to the financial sector on the 17th, the COFIX-linked mortgage loan interest rates based on new loan amounts at KB Kookmin Bank, Woori Bank, and Hana Bank will drop to record lows starting from the 18th, varying by bank.

KB Kookmin Bank's rates will be lowered by 0.06 percentage points to an annual 2.40?3.90%, and Woori Bank's rates will also decrease by 0.06 percentage points to an annual 2.71?4.31% compared to the 15th. Hana Bank's rates will fall by 0.014 percentage points to an annual 2.740?4.040%.

From the next day, Shinhan Bank will apply rates of 2.49?3.74% annually. Although this is slightly higher than the record low of 2.45?3.46% on the 20th of last month, it remains low. NH Nonghyup Bank offers the lowest among the five major banks, with rates of 2.27?3.88% annually.

Looking at the new balance-based COFIX as well, KB Kookmin Bank's mortgage loan interest rates will decrease by 0.08 percentage points from 2.74?4.24% on the 15th to 2.66?4.16%.

Woori Bank applies new balance-based COFIX-linked mortgage loan rates of 2.82?4.42%, while Shinhan Bank's rates are 2.49?3.74%, Hana Bank's 2.440?3.740%, and Nonghyup Bank's 2.38?3.99%.

[Image source=Yonhap News]

The reason variable-rate mortgage loan interest rates have fallen to record lows is due to the overall decline in market interest rates caused by the spread of the novel coronavirus infection (COVID-19).

In March, the Bank of Korea sharply cut its base interest rate by 0.5 percentage points from 1.25% to 0.75% annually. This was the first time the base rate dropped to the 0% range. Following the Bank of Korea's rate cut, banks also simultaneously lowered interest rates on deposit products such as time deposits, which in turn caused the COFIX linked to these rates to fall. COFIX is the weighted average of interest rates on deposit products raised by domestic banks such as Shinhan, Kookmin, and Hana, and serves as the benchmark for variable-rate mortgage loan interest rates.

The mixed (fixed) interest rate, which is based on the 5-year financial bond yield, also remains at historically low levels. The mixed rates are as follows: KB Kookmin Bank 2.13?3.63%, Nonghyup Bank 2.17?3.58%, Hana Bank 2.309?3.609%, Shinhan Bank 2.60?3.61%, and Woori Bank 2.72?4.13%. Based on current rates, fixed rates are more advantageous for financial consumers, but if market interest rates continue to decline, variable rates may fall further.

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