COFIX Rises for Fourth Straight Month, Pressuring Variable Mortgage Rates
The cost of funds index, or COFIX, used as a benchmark for variable-rate mortgages at South Korean banks, rose for a fourth consecutive month in July, putting further pressure on borrowing costs. With the new-loan COFIX moving toward the mid-3% range, variable mortgage rates linked to the index are
The cost of funds index, or COFIX, a key benchmark for variable-rate mortgages in South Korea, has risen for a fourth straight month in July, putting pressure on borrowing costs. By July, the new-loan COFIX had reached 3.18%, up 0.13 percentage points from June to 3.00%. This four-month climb, from 2.81% in March to 3.05% in June, signals a broad increase in banks' funding costs.
The balance-based COFIX also rose to 3.00% in July, up 0.06 percentage points, while the new-balance COFIX increased to 2.65%, a 0.11 percentage point rise. These measures indicate higher funding expenses for banks, driven by higher bond yields. As COFIX approaches the mid-3% range, variable mortgage rates tied to the index may climb further, increasing the interest burden for borrowers.
Banks anticipate the latest COFIX reading will affect variable-rate mortgage loans starting August 19. If banks introduce higher lending spreads or cut preferential discounts to manage household lending, the impact on borrowers could be more significant than the COFIX increase alone. The short-term COFIX, calculated based on three-month funding, has remained between 2.88% and 2.91% over the past four weeks.
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