COFIX Falls Further... But Mortgage Loan Rates Rise Instead

Banks Change Cost Calculation Standards
Credit Loan Interest Rates Decrease Further

[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, has dropped to a record low of 0.81%. However, the mortgage loan interest rates at major commercial banks have slightly increased instead. Banks explain this is due to changes in the cost calculation standards. Meanwhile, unsecured personal loan interest rates remain lower than mortgage loan rates, with some personal loans available from as low as 1% per annum.

According to the banking sector on the 19th, KB Kookmin Bank set the variable-rate mortgage loan interest rates linked to the 'July COFIX' at 2.23% to 3.73% per annum for new loans starting from that day. Compared to the previous day, both the upper and lower limits decreased by 8 basis points (1bp = 0.01 percentage points), but it is 2bp higher than on July 16, when the June COFIX was first applied.

Kookmin Bank applied interest rates of 2.21% to 3.71% from July 16 to 30, and 2.31% to 3.81% from July 31 to August 15.

NH Nonghyup Bank, which surprised the market last month by offering mortgage loan products with rates in the low 1% range (1.96% to 3.57%), has also seen its mortgage loan rates exceed 2%. The rates applied on this day were 2.04% to 3.65%, up 8bp from July 16.

A banking sector official explained, "There was a change in the bank's own cost calculation standards on July 31, which caused the rates to rise compared to last month."

COFIX is calculated based on the weighted average interest rates of funds raised by eight banks, including Shinhan, Kookmin, Hana, and Woori Banks. Banks add margins and preferential rates to the COFIX announced mid-month to set and disclose the mortgage loan interest rate benchmarks for the relevant period. Since July 31, Kookmin Bank raised the new COFIX-based mortgage loan (6-month variable) interest rates by 10bp. On the same day, Nonghyup Bank also raised its variable mortgage loan rates by 16bp compared to the previous day, reflecting funding costs included in the margin.

A Nonghyup Bank official said, "We adjust costs by reflecting funding costs four times a year on a fixed schedule. The increase at the end of July reflects the calculation of costs including the rise in financial bond rates in the second quarter."

Woori Bank applied rates of 2.30% to 3.90% starting that day. This is 8bp lower than the previous day and 6bp lower than July 16, moving in line with the COFIX decline. Shinhan and Hana Banks, which calculate mortgage loan rates daily, maintained their rates at 2.31% to 3.56% and 2.48% to 3.78%, respectively, unchanged from the previous day.

Meanwhile, it is easy to find personal loan products with interest rates in the low 1% range at major banks. Shinhan Bank's employee personal loan minimum rate was 1.75% as of that day, and Nonghyup Bank also announced refinancing loan products with limits up to 150 million KRW at rates of 1.67% to 3.07%. However, these rates apply only to cases such as refinancing from other banks, smartphone-exclusive loans, prime customers like large corporations or government employees, and credit ratings of 1 to 2. Actual rates applied to individuals may vary.

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