COFIX Drops Again... Mortgage Loans Below 1% Emerging

[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, continues its downward trend.

According to the Bankers Association on the 15th, the COFIX based on new transaction amounts last month was 0.89%, down 0.17 percentage points from the previous month. This marks the seventh consecutive month of decline. The drop is due to major commercial banks consecutively lowering deposit interest rates, and it is the first time that the COFIX based on new transaction amounts has fallen into the 0% range.

Additionally, the new outstanding balance-based COFIX also fell by 0.08 percentage points to 1.18%. This is the twelfth consecutive month of decline since its first announcement on July 15 last year. The existing outstanding balance-based COFIX (1.48%) also decreased by 0.07 percentage points, marking 15 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 reflects these changes by rising or falling accordingly.

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

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

While the new and existing outstanding 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, allowing it to reflect 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 the same, the loan interest rate moves according to the fluctuation range of the COFIX that was the basis at the time of the initial loan.

From the 16th, when taking out new mortgage loans, the interest rate reflecting the June COFIX will be applied, causing loan interest rates to decrease slightly. Products with interest rates as low as the low 1% range are also expected to be introduced.

A Bankers Association official 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.