The Benchmark COFIX for Variable-Rate Mortgage Loans Falls Below 4% Again

Down 0.16%P in a Month to 3.84%
Reflected in Bank Mortgage Loan Rates
Simultaneous Reduction of 0.01~0.20%P

The COFIX (Cost of Funds Index), which serves as the benchmark for variable interest rates on mortgage loans, fell below the 4% mark again after a month, leading to a simultaneous reduction in loan interest rates across the banking sector. Borrowers' interest burdens are also expected to decrease further.

According to the Korea Federation of Banks on the 16th, the COFIX based on new loan amounts last month was recorded at 3.84%, down 0.16 percentage points from the previous month. The COFIX based on outstanding balances decreased by 0.06 percentage points to 3.29%, and the COFIX based on total balances dropped by 0.02 percentage points to 3.87%.

Reflecting the decline in COFIX, variable interest rates on mortgage loans across banks were lowered by 0.01 to 0.20 percentage points starting today. KB Kookmin Bank reduced both the upper and lower limits by 0.16 percentage points to 4.08?5.48%, Shinhan Bank lowered rates by 0.01 percentage points to 4.00?5.61%, Hana Bank cut rates by 0.036 percentage points to 5.145?6.645%, Woori Bank decreased rates by 0.16 percentage points to 4.75?5.95%, and NH Nonghyup Bank reduced rates by 0.20 percentage points to 4.32?6.03%.

COFIX is the weighted average interest rate of funds raised by eight domestic banks, reflecting changes in interest rates on deposit products such as savings and time deposits, as well as bank bonds. In other words, a decline in COFIX indicates that banks have procured funds at a lower cost than before.

Until early to mid-November last year, the sustained high interest rates and rising deposit rates pressured banks' funding conditions. However, after the U.S. Federal Reserve (Fed) hinted at a pause in tightening at the November Federal Open Market Committee (FOMC) meeting, the trend reversed downward. Expectations for interest rate cuts spread, causing market interest rates to decline.

According to the Korea Financial Investment Association, the 6-month bank bond yield was 4.113% on November 13th, exceeding 4%, but after the Fed suggested the possibility of ending tightening, it has steadily declined to 3.642% as of the previous day. This marks a 0.471 percentage point drop over two months.

However, the financial sector views the recent market interest rates as excessively reflecting expectations for rate cuts. A representative from a commercial bank said, "Although the Fed has hinted at rate cuts, it is difficult to predict the timing and speed, and since the domestic base rate is already well below the U.S. base rate, it is uncertain whether the rate cuts expected by the market will materialize. If actual rate cuts do not occur, interest rates are expected to remain stable."

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