COFIX Decline Continues... Mortgage Loan Rates Expected to Drop Slightly

[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 fallen again.

According to the Korea Federation of Banks on the 15th, the COFIX based on new contracts last month was 0.80%, down 0.01 percentage points from the previous month. This marks the ninth consecutive month of decline. This is due to major commercial banks consecutively lowering deposit interest rates.

Additionally, the new balance-based COFIX also dropped by 0.04 percentage points to 1.07%. This is the 14th consecutive month of decline since its first announcement on July 15 last year. The existing balance-based COFIX (1.36%) also fell by 0.06 percentage points, marking 17 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 agreement sales, 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 contracts is calculated based on funds newly raised during the month, so it reflects 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 by the amount of change in the COFIX that was used as the benchmark when the loan was first taken out. Due to the decline in COFIX last month, mortgage loan interest rates are also expected to fall slightly.

A representative from the Korea Federation of Banks said, “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.