New Balance and New Handling Amount COFIX Gap 1.62%P
Widest Since Aggregation Began
Increased Search by Yeongkkeuljok for Low Mortgage Loan Rates↑
[Asia Economy Reporter Minwoo Lee] The newly issued amount-based COFIX (Cost of Funds Index), which serves as the benchmark for variable interest rates on bank mortgage loans, has surged to nearly 4%, reaching an all-time high. Along with this, the gap with the outstanding balance-based COFIX has widened to a record level, intensifying the competition among 'Yeongkkeuljok' (those who borrow to the maximum) trying to lower their loan interest rates even slightly.
According to the Bankers Association on the 16th, the newly issued amount-based COFIX for October rose by 0.58 percentage points from the previous month to 3.98%. This is the highest level since the announcement of the newly issued amount-based COFIX began in January 2010. The month-over-month increase is also the largest recorded since the announcement started. The surge in COFIX is attributed to the Bank of Korea steadily raising the base interest rate in line with the global tightening trend, coupled with increased funding costs due to bond market tightening triggered by Legoland-related issues.
The gap with the relatively less volatile outstanding balance-based COFIX has also widened to a record level. The outstanding balance-based COFIX for October reached 2.36%, the highest since the index began to be calculated in June 2019. Notably, the gap with the newly issued amount-based COFIX expanded to 1.62 percentage points, nearly three times the 0.55 percentage points gap recorded in March this year.
The outstanding balance-based COFIX is calculated by weighted averaging the interest rates and balances of major deposit products held at the end of the month, including regular savings/deposits, mutual installment savings, housing installment savings, financial bonds, and demand deposits. Compared to the newly issued amount-based COFIX, which only considers newly issued deposit products during the target month and excludes products with near-zero interest rates such as demand deposits, the outstanding balance-based COFIX typically reflects market funding rates more slowly and exhibits less volatility.
As the gap widens, competition among consumers needing loans is expected to intensify. Since loan interest rates based on the outstanding balance-based COFIX are lower, a concentration effect is anticipated. Currently, major commercial banks such as KB Kookmin Bank, Hana Bank, and Shinhan Bank offer mortgage loans based on the outstanding balance-based COFIX. On this day, KB Kookmin Bank’s variable interest rate mortgage loans based on the newly issued COFIX ranged from 5.77% to 7.17%, about 1 percentage point higher than the 4.80% to 6.20% range for mortgage loans based on the outstanding balance COFIX. Hana Bank also has mortgage loan interest rates based on the newly issued amount COFIX about 0.5 percentage points higher.
Amid the fear of rising loan interest rates, 'Yeongkkeuljok' are moving to find even slightly lower rates. A representative example is the large number of new mortgage loan consumers choosing fixed interest rates. According to the financial sector, about 90% of Woori Bank’s new mortgage loans last month were fixed-rate. Shinhan Bank’s fixed-rate mortgage loan ratio also surpassed 70% last month, up from 67% in September. A financial sector official said, “There are many inquiries to get loans at even slightly lower interest rates,” adding, “As the interest rate hike phase continues, this trend is expected to persist for the time being.”
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
