KOFIX Falls Again...Mortgage Loan Interest Rates to Decrease Further

[Asia Economy Reporter Minyoung Kim] The COFIX (Cost of Funds Index), which serves as the benchmark for variable-rate mortgage loan interest rates in the banking sector, continues its downward trend.

According to the Bankers Association on the 15th, the COFIX based on new loan amounts last month was 1.06%, down 0.14 percentage points from the previous month. This marks the sixth consecutive month of decline. Although the drop was slightly smaller than in March (0.17 percentage points), it was larger than in April (0.06%).

The decline in COFIX based on new loan amounts is due to major commercial banks consecutively lowering their deposit interest rates.

Additionally, the new balance-based COFIX also fell by 0.05 percentage points to 1.26%. This marks the 11th consecutive month of decline since its first announcement on July 15 last year. The existing balance-based COFIX (1.55%) also dropped by 0.06 percentage points, marking 14 consecutive months of decline.

COFIX refers to the weighted average interest rate of funds raised by eight major commercial banks including Shinhan, KB Kookmin, 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 loan 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 and preferential interest rates remain unchanged, the loan interest rate moves by the amount of change in the COFIX that was the basis at the time of the initial loan.

From the 16th, when taking out a new mortgage loan, the interest rate reflecting the May COFIX will be applied, causing loan interest rates to decrease slightly.

An official from the Bankers Association advised, “Those who wish to take out COFIX-linked loans need to fully understand these characteristics of COFIX and carefully select loan products.”

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