COFIX Rises 0.52%p in One Month... "Largest Increase in 12 Years"

[Asia Economy Reporter Eunju Lee] The COFIX (Cost of Funds Index), which serves as the benchmark for variable interest rates on mortgage loans, has risen by 0.52 percentage points (p) within a month. This increase is attributed to the simultaneous rise in fixed deposit and financial bond interest rates following the recent hike in the base interest rate last month.

On the 16th, the Korea Federation of Banks announced that the COFIX rate based on new transactions in July this year rose by 0.52%p to 2.9%, compared to 2.38% in the previous month. This marks the largest increase in 12 years and 6 months since the COFIX rate based on new transactions was first published in January 2010.

The COFIX based on outstanding balances was recorded at 2.05%, up 0.22%p from 1.83% the previous month. The newly introduced COFIX based on new outstanding balances, implemented in 2019, also rose by 0.20%p to 1.62% compared to last month.

COFIX represents the weighted average interest rate of funds raised by eight domestic banks. It fluctuates upward or downward reflecting changes in interest rates of deposit products such as actual deposits, savings, and bank bonds handled by banks.

The COFIX based on new transactions and outstanding balances includes fixed deposits, installment savings, mutual installment savings, housing installment savings, negotiable certificates of deposit, repurchase agreement sales, commercial paper sales, and financial bonds (excluding subordinated bonds and convertible bonds). The new outstanding balance-based COFIX additionally includes deposits, other borrowings, and settlement funds.

A representative from the Korea Federation of Banks explained, “The biggest factors influencing the COFIX rate are fixed deposits and financial bonds,” adding, “The increase in fixed deposit interest rates reflects the impact of the Bank of Korea’s base rate hike in July.”