Financial Bond Short- and Long-Term Yields Both Hit Record Highs... Increased Burden on Yeongkkeuljok

5-Year and June Financial Bonds Both Hit Annual Highs
COFIX Also Reaches Record Highs, Home Mortgage Rates Soar

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[Asia Economy Reporter Minwoo Lee] After a brief pause, financial bond yields have all hit new highs for the year, regardless of maturity. Along with the financial bond yields, the Cost of Funds Index (COFIX), which serves as the benchmark for bank loans, has also been rising continuously, suggesting that the pain for home mortgage borrowers who have maximized their borrowing, known as ‘Yeongkkeuljok,’ is expected to intensify.

According to the Bond Information Center of the Korea Financial Investment Association on the 20th, the 5-year financial bond (unsecured, AAA) yield, which serves as the benchmark for fixed-rate home mortgage loans, recorded 5.224% as of the previous day (19th). This marks the first time in about 12 years and 10 months since February 24, 2010 (5.24%) that it has risen above the 5.2% level.

Short-term bond yields also surged accordingly. On the same day, the 6-month financial bond (unsecured, AAA) yield recorded 4.069%, rising more than 6 basis points (bp, 1bp=0.01%) in a single day. The 6-month bond yield surpassing 4% is the first time in about 13 years since January 7, 2009 (4.12%). The 6-month financial bond yield, along with COFIX based on new loan amounts, serves as the benchmark for bank variable-rate mortgage loan products.

COFIX is also rising sharply. According to the Korea Federation of Banks, the September COFIX based on new loan amounts, announced on the 17th, was 3.4%, up 0.44 percentage points from the previous month. This is the first time it has broken into the 3% range since December 2012 (3.09%).

In this situation, the upper limit of bank mortgage loan interest rates has already exceeded 7%. According to the financial sector, the mixed-rate (5-year fixed) mortgage loan interest rates of the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NongHyup?were recorded between 5.01% and 7.10% per annum. The upper limit of variable interest rates has also recently entered the 7% range for the first time in 14 years. As central banks around the world are expected to continue tightening monetary policy and raising benchmark interest rates, market interest rates are likely to rise for the time being. A financial sector official explained, “The burden on ‘Yeongkkeuljok’ who have maximized their borrowing can only increase for the time being,” but added, “However, the actual loan interest rates may be lower than the upper limit, and banks may also take measures to partially lower the ceiling.”

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