COFIX rises for a second straight month, adding pressure on variable-rate mortgage loans

[Financial News] COFIX, the benchmark used to set variable-rate mortgage loan rates at banks, rose for the second consecutive month.
According to the Korea Federation of Banks (KFB) on the 15th, the COFIX for new funding in May stood at 2.90%, up 0.01 percentage point from the previous month’s 2.89%.
The COFIX for new funding climbed for two straight months, rising from 2.81% in March to 2.89% in April and 2.90% in May. It is the highest level in the past year.
The outstanding-balance COFIX rose 0.02 percentage point from the previous month to 2.89%. The newly adjusted outstanding-balance COFIX also increased 0.01 percentage point to 2.50%. Both measures have risen for two consecutive months.
As all three indicators moved higher, the interest burden for borrowers using COFIX-linked loans could rise slightly as well.
COFIX is the weighted average funding cost of eight domestic banks. It rises when the rates on deposits, savings products and bank bonds actually issued by banks go up. Since a higher COFIX means banks are paying more to raise funds, it becomes a factor pushing up variable loan rates, including mortgage loans.
Short-term COFIX also showed an upward trend. Over the past four weeks, the short-term COFIX published on May 20 rose from 2.73% to 2.77% on May 28, 2.79% on June 4 and 2.82% on June 10. Short-term COFIX is calculated based on short-term funds with a three-month maturity.
Banks believe funding costs may continue to face upward pressure as bond yields have recently risen. If that is combined with adjustments to each bank’s spread and preferential rates amid efforts to manage household lending, the actual increase in borrowing costs felt by borrowers could be even larger.
coddy@fnnews.com Ye Byeong-jeong Reporter