COFIX Decline: Will it Signal a Reduction in Mortgage Loan Rates?

There is important news regarding the current relationship between lending rates and variable mortgage rates that we need to examine closely. Despite a slight decline in the Cost of Funds Index (COFIX) for the past two months, the lending rates have been on the rise. This situation has left those considering mortgage loans wondering when mortgage rates might decrease.

 

Given the current COFIX situation and the interest rate policies of banks, it is difficult to predict the movement of variable mortgage rates. Therefore, for those considering mortgage loans, consulting with financial experts to choose the appropriate loan products would be a wise decision.

 

Causes and Effects of the COFIX Decline

According to the Korea Federation of Banks, COFIX decreased by 0.03 percentage points (p) to 3.66% last month compared to the previous month. This marks the second consecutive monthly decline, following a decrease in July. But what is the reason behind this COFIX decline?

 

One significant reason is the limited impact of the recent increase in deposit rates by major commercial banks. The fact that deposit rates did not rise significantly is analyzed as a contributing factor to the slight COFIX decrease. However, this decline was minimal, and currently, financial institutions' deposit rates are on the rise, making it challenging for the decline trend to accelerate.

The Relationship Between Mortgage Variable Rates and COFIX

COFIX is the weighted average interest rate of funds raised by eight domestic banks (NH NongHyup, Shinhan, Woori, SC First, Hana, KEB Hana, KB Kookmin, Citibank Korea). It adjusts upward or downward when interest rates on receiving products such as savings and bank bonds actually handled by banks increase or decrease. Therefore, when COFIX decreases, variable mortgage rates linked to it also decline. However, it is uncertain how long this COFIX decline will persist this time.

Impact of Rate Increases

In addition to this, this month, commercial banks have entered into competition to secure deposit customers by raising time deposit rates. Shinhan Bank, for instance, has introduced the "Shinhan My Plus Time Deposit" with an interest rate of up to 3.95%, and other banks are also offering time deposit rates in the 4% range. Consequently, if both deposit rates and bank bond rates increase, there is a possibility that COFIX and variable mortgage rates may face upward pressure.

Outlook for COFIX and Loan Rates

At present, it is not certain whether the COFIX downward trend will continue into the next month. Consequently, predicting when variable mortgage rates will decrease is challenging. Nevertheless, variable mortgage rates remain at relatively high levels and have a significant impact on consumers' loan rates. Therefore, while waiting for loan rates to decrease, it is essential to compare various financial products carefully and make prudent choices.

 

Given the current COFIX situation and the interest rate policies of banks, it is difficult to predict the movement of variable mortgage rates. Therefore, for those considering mortgage loans, consulting with financial experts to choose the appropriate loan products would be a wise decision. It is important to closely monitor future interest rate trends and adapt to the financial situation accordingly.