KOFIX Falls to 3% Range... Variable Interest Rates on Mortgage Loans to Decrease on the 16th

KOFIX Falls for Two Consecutive Months, Reaching 3.82% as of January

[Image source=Yonhap News]

[Asia Economy Reporter Sim Nayoung] The COFIX (Cost of Funds Index), which serves as the benchmark for variable interest rates on mortgage loans in the banking sector, has fallen for two consecutive months. This is due to the recent decline in bond yields and deposit interest rates. Accordingly, variable interest rates on mortgage loans at commercial banks are expected to decrease starting from the 16th.

According to the Korea Federation of Banks on the 15th, the COFIX based on new transactions in January was recorded at 3.82%, down 0.47 percentage points from 4.29% in December last year. Previously, the COFIX for December last year turned downward for the first time in 11 months and has fallen for two consecutive months. The COFIX in the 3% range is the first in three months since October last year’s COFIX (3.98%).

Commercial banks must reflect the COFIX rate announced on this day in the new variable mortgage loan interest rates starting from the 16th and lower the rates accordingly.

COFIX is the weighted average interest rate of funds raised by eight domestic banks. It reflects changes in interest rates of deposit products such as actual deposits, savings, and bank bonds handled by banks. When COFIX falls, it means banks can secure funds by paying less interest. Conversely, when COFIX rises, the opposite is true.

On the other hand, the balance-based COFIX rose by 0.11 percentage points from 3.52% to 3.63%. The interest rates of deposit products such as time deposits, installment savings, mutual installment savings, housing installment savings, negotiable certificates of deposit, repurchase agreements, commercial paper sales, and financial bonds (excluding subordinated bonds and convertible bonds) are reflected in both the new transaction-based COFIX and the balance-based COFIX. The newly introduced 'New Balance-based COFIX' (3.02%), implemented since June 2019, also rose by 0.10 percentage points in one month.