Variable Mortgage Loan Interest Rates Drop Again... Will They Hit the Historic 1% Range?

Yonhap News

[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 have also fallen to historically low levels.

According to the financial sector on the 16th, NH Nonghyup Bank will apply a COFIX-linked mortgage loan interest rate based on new transaction amounts at an annual rate of 2.13?3.74%, down 0.14 percentage points from March 18. This is the lowest level ever recorded.

Shinhan Bank will also apply mortgage loan interest rates at an annual rate of 2.24?3.49% starting today, which is also a record low.

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KB Kookmin Bank’s rates are 2.26?3.76% annually, Hana Bank’s are 2.506?4.806%, and Woori Bank’s are 2.56?4.16%, in that order.

Looking at the new balance-based COFIX, Nonghyup Bank’s mortgage loan interest rates dropped by 0.05 percentage points from the previous day to 2.33?3.94%.

KB Kookmin Bank’s new balance-based COFIX-linked mortgage loan interest rates are 2.61?4.11%, and Woori Bank’s are 2.76?4.36%, both down 0.05 percentage points from the previous day.

However, Shinhan Bank (2.24?3.49%) and Hana Bank (2.216?3.516%) saw their rates rise slightly by 0.01 percentage points and 0.0018 percentage points respectively compared to the previous day, but they remain at very low levels.

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 disease (COVID-19).

In March, the Bank of Korea sharply cut the base interest rate from 1.25% to 0.75%, a 0.5 percentage point reduction, and then lowered it again by 0.25 percentage points on the 28th of last month, ushering in an era of 0.5% interest rates. This marks a firm entry into a zero interest rate era.

Following the Bank of Korea’s rate cuts, banks also collectively lowered interest rates on deposit products such as time deposits, which in turn caused the COFIX linked to these rates to decline. COFIX is the weighted average interest rate of deposit products raised by eight domestic banks including Shinhan, Kookmin, Hana, and Woori.

There are forecasts that if major banks continue to lower deposit interest rates, variable-rate mortgage loan interest rates could fall to the 1% range annually.

On the other hand, mixed (fixed) interest rates, which are based on the 5-year financial bond rates, rose slightly. Shinhan Bank’s mixed rates increased by 0.02 percentage points from the previous day to 2.62?3.63%, and Hana Bank’s rose by 0.036?0.101 percentage points to 2.353?3.653%. This is due to the recent stabilization of the financial market, which caused financial bond rates to rise.

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