Will Variable Interest Rates on Mortgage Loans Drop Again? ... COFIX Falls by 0.1%P

On the 23rd, as domestic market interest rates and bank loan interest rates rapidly rise, a banner displaying loan interest rates is hung on the exterior wall of a commercial bank in Seoul. Photo by Jinhyung Kang aymsdream@

The Cost of Funds Index (COFIX), the benchmark for variable interest rates on mortgage loans in the banking sector, has fallen again.

According to the Korea Federation of Banks on the 16th, the COFIX based on new transaction amounts last month was recorded at 3.42%, down 0.10 percentage points from 3.52% in June. COFIX had risen for the first time in six months in May, then turned downward in June, and has been declining for two consecutive months.

The COFIX based on outstanding balances dropped 0.04 percentage points from 3.73% to 3.69%. The COFIX based on new outstanding balances was recorded at 3.15%, down 0.02 percentage points.

COFIX is the weighted average interest rate of funds raised by eight domestic banks, reflecting increases or decreases in interest rates on deposit products such as savings and time deposits, and bank bonds actually handled by banks. In particular, the COFIX based on new transaction amounts is calculated using funds newly raised during the relevant month, allowing it to relatively quickly reflect changes in market interest rates. As COFIX rises, mortgage loan rates at major commercial banks are also expected to be adjusted.

The short-term COFIX, based on the announced interest rates over the past four weeks, ranged from 3.39% to 3.49%. The short-term COFIX is calculated based on short-term funds with a contract maturity of three months.