Emergence of Ultra-Low Interest Rate Mortgage Loans at Around 1% per Year

June KOFIX Hits Record Low
NongHyup Bank Adjusts to 1.96~3.57%

[Asia Economy Reporter Kim Min-young] The era of mortgage loans with interest rates in the 1% range per annum has begun. Amid an unprecedented ultra-low interest rate trend, the variable interest rates on mortgage loans at major commercial banks have fallen to historically low levels.

According to the banking sector on the 16th, NH Nonghyup Bank adjusted its COFIX (Cost of Funds Index)-linked variable interest rate mortgage loan rates for new loans, effective from that day, down by 0.17 percentage points from the previous day to an annual rate of 1.96?3.57%. A Nonghyup Bank official stated, "This is the first time since the establishment of Nonghyup Bank in 2012 that mortgage loan rates have fallen into the 1% range."

Woori Bank also set its variable mortgage loan rates from that day at 2.36?3.96%, a decrease of 0.17 percentage points compared to the previous day.

KB Kookmin Bank applied rates of 2.21?3.71%, down 0.18 percentage points from the previous day, also marking a historic low.

These banks also lowered their COFIX-linked mortgage loan rates based on the new balance by 0.08?0.09 percentage points. From that day, Nonghyup Bank adjusted to 2.25?3.86%, Kookmin Bank to 2.52?4.02%, and Woori Bank to 2.65?4.05%.

This is due to the COFIX for June announced by the Korea Federation of Banks the previous day, which fell to a record low.

The COFIX based on new loan amounts for June was 0.89%, down 0.17 percentage points from May's 1.06%. This is the first time COFIX has fallen below 1% since its initial disclosure in February 2010.

The COFIX based on outstanding balances was 1.18% last month, down 0.08 percentage points from May.

COFIX is the weighted average interest rate of deposit products used by eight banks to raise funds, including fixed deposits, installment savings, mutual installment savings, and housing installment savings. After the Bank of Korea lowered the base interest rate to 0.50% in May, banks' funding costs decreased, leading to a decline in COFIX. This, in turn, increases the potential for lowering loan interest rates.

Shinhan Bank and Hana Bank, which calculate COFIX-linked mortgage loan rates daily, saw no rate changes within the day. The mortgage loan rates for Shinhan and Hana on that day were 2.29?3.54% and 2.491?3.791%, respectively.

A banking sector official explained, "Although mortgage loans with rates in the low 1% range have appeared, most customers will likely receive rates in the 2?3% range because they must meet specific conditions such as being farmers or other preferential criteria."

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