April COFIX 3.54%... Fifth Consecutive Month of Decline

The Cost of Funds Index (COFIX), based on new loan origination amounts and serving as an benchmark for variable interest rates on mortgage loans, has shown a decline for five consecutive months.

The Korea Federation of Banks announced on the 15th that last month’s COFIX based on new loan origination amounts fell by 0.05 percentage points from the previous month to 3.54%. The COFIX based on outstanding loan balances decreased by 0.02 percentage points to 3.76%, and the COFIX based on new outstanding balances also dropped by 0.02 percentage points to 3.17%.

[Image source=Yonhap News]

COFIX is the weighted average interest rate of funds raised by eight domestic banks. It reflects increases or decreases in interest rates on deposit products such as savings and time deposits, as well as bank bonds actually handled by banks, causing COFIX to rise or fall accordingly.

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 and 3.97% in October, reaching 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 4%.

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 has continued this year. This is due to the market’s expectations of interest rate cuts, which led to a drop in bank bond yields and a decline in deposit rates at banks.

The short-term COFIX, based on the announced interest rates over the past four weeks, ranged from 3.55% to 3.57%. The short-term COFIX is selected based on short-term funds with a contract maturity of three months.

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