January COFIX 3.66%... Declines for Two Consecutive Months

The Cost of Funds Index (COFIX), based on new loan origination amounts and serving as an indicator for variable interest rates on mortgage loans, has declined for two consecutive months.

The Korea Federation of Banks announced on the 15th that the COFIX based on new loan origination amounts fell by 0.18 percentage points from the previous month to 3.66% last month. The COFIX based on outstanding loan balances decreased by 0.03 percentage points to 3.84%, while the COFIX based on new outstanding balances remained unchanged at 3.29%. The recent COFIX reduction will be applied starting from the 16th.

COFIX represents the weighted average interest rate of funds raised by eight domestic banks. It rises or falls in response to increases or decreases in interest rates on deposit products such as savings and time deposits, as well as bank bonds, that banks actually handle.

At the end of last year, COFIX showed a continuous upward trend due to competition among commercial banks for deposits. The COFIX based on new loan origination amounts, which was 3.66% in August, rose to 3.82% in September, 3.97% in October, and reached 4.00% in November. This was the first time in 11 months since December 2022 (4.2%) that the COFIX based on new loan origination amounts exceeded the 4% level.

However, after the U.S. Federal Reserve signaled the end of tightening in November, COFIX reversed to a decline within a month, and the downward trend continued this month. This was influenced by market expectations of interest rate cuts, leading to a drop in bank bond yields and a decline in deposit rates at banks.

The short-term COFIX, based on the published interest rates over the past four weeks, ranged from 3.67% to 3.77%. The short-term COFIX is selected for short-term funds with a contract maturity of three months.

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