Commercial Bank Personal Loan Interest Rates Reach 8%, Mortgage Loan Rates Approach 7% Range

On the 15th, COFIX announced reflecting last month's BOK big step
Loan interest rates to rise again from the 16th

[Asia Economy Reporter Sim Nayoung] Starting from the 16th, loan interest rates will rise once again, with credit loan rates and jeonse deposit loan rates at commercial banks expected to surpass 8%, and variable interest rates on mortgage loans anticipated to settle in the 7% range. This is because the shock will be directly absorbed into the interest rates once the COFIX (Cost of Funds Index), which is the basis for calculating loan interest rates based on new transaction amounts, is announced on the 15th.

The banking sector expects the October COFIX to reach 4%. The September COFIX announced last month was 3.40%, up 0.44 percentage points (p) from the previous month. It was also the highest level in 10 years and 2 months since July 2012 (3.40%).

A representative from a commercial bank said, "The atmosphere in the banking sector is that the October COFIX will increase sharply, similar to September," adding, "This is because after the Bank of Korea implemented a big step (raising the base interest rate by 0.5%p at once) last month, banks simultaneously raised deposit interest rates, which influenced this figure."

As of the 14th, the variable interest rates on mortgage loans at the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) ranged from 5.09% to 6.79%, jeonse deposit loan rates ranged from 5.21% to 7.32%, and credit loans (6 months) ranged from 6.11% to 7.46%. These interest rates will rise further by the amount of the COFIX increase announced on the 15th.

COFIX is the Cost of Funds Index calculated by the weighted average of funding costs from eight major banks. It is calculated by weighting the new transaction amounts of eight items, including deposits, savings, and bank bonds. In other words, when deposit and savings interest rates and bank bond rates rise → COFIX rises → variable mortgage loan rates, jeonse deposit loan rates, and credit loan rates follow suit.

In particular, on the 12th of last month, the Bank of Korea raised the base interest rate by 0.5%p, and commercial banks immediately raised deposit and savings interest rates by up to 1%p starting the next day, actively participating in raising deposit rates. The deposit and savings interest rates began to reach 5% starting last month. Bond yields also soared last month. The 6-month bank bond yield reached the 4% range, and the 1-year bond yield reached the 5% range, hitting the highest point in about 13 years and continuing to soar. These factors are believed by the banking sector to have pushed up the October COFIX.

Another commercial bank official said, "On the 24th, the Bank of Korea is expected to take another big step at this year's last monetary policy meeting, following July and October, so loan interest rates in the banking sector will fluctuate for two consecutive weeks," adding, "After the base interest rate hike, deposit and savings interest rates will also increase further."

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