The Korea Federation of Banks said Tuesday that the Cost of Funds Index -- a benchmark lending rate for mortgage loans also known as Cofix -- for new loans was set at 2.04 percent for December, up 0.08 percentage points from the previous month.
It marks the highest Cofix rate for new loans since the rate reached an all-time high of 2.08 percent in January 2015.
The Cofix rate for outstanding loans in December was set at 1.99 percent, up 0.04 percentage points from the previous month. This is also the highest rate for outstanding loans since July 2015, when the rate reached a high of 2.08 percent.
The FKB said the Bank of Korea’s decision to raise the base rate by 25 basis points, from 1.50 percent to 1.54 percent in November 2018, affected the deposit rate of banks, which led to a rise in the Cofix rate.
The Cofix rate hike prompted local commercial banks to mark up their mortgage loans Tuesday. KB Kookmin Bank, Korea’s biggest commercial lender by profit, set its mortgage-backed lending rate for outstanding loans at between 3.36 percent and 4.86 percent.
Its rate for new mortgage-backed loans is set at between 3.26 percent and 4.76 percent. Similar loan rate hikes have been adopted by the other remaining local banks.
Cofix is calculated based on costs-of-funding information provided by eight domestic banks in Korea. It is raised or lowered when the interest rate on deposit products, such as savings accounts and bank bonds, is raised or lowered.
In general, the Cofix rate for outstanding loans reflects changes in the market interest rates in a gradual manner, while the Cofix rate for new loans tends to change quickly in tandem with market rates, as it is calculated based on newly financed funds.
“Customers who plan to take out Cofix floating-rate loans need to fully understand the Cofix rate structure and carefully incorporate this factor into their choice of loans,” the FKB said.
By Sohn Ji-young (firstname.lastname@example.org)