Showing a Decline for 3 Consecutive Months
As deposit interest rates at commercial banks have recently declined, the COFIX (Cost of Funds Index), which serves as the benchmark for variable interest rates on mortgage loans in the banking sector, has also fallen for the third consecutive month.
On the 15th, the Korea Federation of Banks announced that the COFIX based on new transactions in February was 3.53%, down 0.29 percentage points (p) from 3.82% in January. Previously, the COFIX based on December last year fell for the first time in 11 months and has been declining for three consecutive months.
Starting from the 16th, banks will apply the newly announced COFIX rate to lower the variable interest rates on new mortgage loans.
On the other hand, the COFIX based on outstanding balances rose by 0.04 percentage points from 3.63% to 3.67%. The newly introduced "New Outstanding Balance-based COFIX" (3.07%), implemented since June 2019, also increased by 0.05 percentage points in one month.
COFIX is the weighted average interest rate of funds raised by eight domestic banks, reflecting 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, and when COFIX rises, it means the opposite.
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