[Will Interest Rates Rise Again?] ①Bank Funding Rates Near 'All-Time High'... Increased Burden on Mortgage Loans

As the Cost of Funds Index (COFIX) interest rate in the banking sector turned downward for the first time in three months, borrowers are breathing a sigh of relief. However, there are expectations that loan interest rates will inevitably continue to rise for the time being. This is because the U.S. 10-year Treasury yield has surged to its highest level in 15 years, exerting upward pressure on Korean bond yields, and the U.S. Federal Reserve (Fed) has not ruled out the possibility of further rate hikes.

According to the financial sector on the 22nd, the new COFIX-based mortgage loan interest rates (variable) at the four major commercial banks (KB Kookmin, Shinhan, Hana, and Woori) were recorded at an annual rate of 4.30% to 6.93%. Compared to the rates on the 9th (4.33% to 6.92%), the upper limit rose by 0.01 percentage points, while the lower limit fell by 0.03 percentage points.

The slight decline in the lower end of mortgage loan rates at the four major banks is interpreted as a result of the COFIX turning downward. According to the Korea Federation of Banks, the COFIX based on new transaction amounts last month was 3.69%, down 0.01 percentage points from the previous month. This marks the first time in three months since May that the COFIX has turned downward.

However, within the financial sector, despite the COFIX rate's "breather," it is still considered difficult to say that loan interest rates have entered a downward phase. This is because the U.S. 10-year Treasury yield has exceeded 4.3%, pushing up domestic bank bond yields. Since banks raise funds not only through deposits but also by issuing bank bonds, an increase in bond yields can lead to higher loan interest rates.

Another factor is that the Fed has not ruled out the possibility of additional rate hikes. In the recently released minutes of the Federal Open Market Committee (FOMC), the majority of members hinted at the possibility of further tightening. Although the Bank of Korea's Monetary Policy Committee meeting scheduled for the 24th is likely to keep the base rate steady at 3.50%, the Fed's stance could exert upward pressure on domestic loan interest rates.

In fact, bank bond yields are also soaring. According to the Korea Financial Investment Association, the yield on 5-year AAA-rated bank bonds reached 4.411% on the 17th. This is the highest level since the U.S. Silicon Valley Bank (SVB) bankruptcy incident in early March. Factors such as banks increasing deposits and bond issuance due to the restoration of liquidity regulations to 95%, and the sharp rise in U.S. Treasury yields appear to have had a combined effect.

This impact is clearly reflected in interest rates as well. As of this day, despite the COFIX decline, the upper limit of variable mortgage loan interest rates at the four major commercial banks rose by about 0.01% compared to the 9th. A representative from a commercial bank said, "Although the COFIX rate fell due to the impact of deposit interest rate cuts, the magnitude is not large, and considering conditions such as rising bond yields, loan interest rates are expected to show a slight upward trend for the time being."