New-loan Cofix reaches 3.18%, up 0.13 percentage points from prior month

ATM machines at major banks in Seoul. [Yonhap]
ATM machines at major banks in Seoul. [Yonhap]

The Cofix (Cost of Funds Index), the benchmark for variable-rate housing loans at South Korean banks, rose for the fourth consecutive month, putting further upward pressure on adjustable mortgage rates tied to the index.

According to the Korea Federation of Banks on Tuesday, the new-loan Cofix for July came in at 3.18%, up 0.13 percentage points from the previous month. The index has climbed steadily since March, when it stood at 2.81%, rising to 2.89% in April, 2.90% in May and 3.05% in June before reaching 3.18% in July. The July reading is 0.67 percentage points above the 2.51% recorded in July last year.

The outstanding-balance Cofix rose 0.06 percentage points, from 2.94% in June to 3.00% in July, while the new outstanding-balance Cofix climbed 0.11 percentage points over the same period, from 2.54% to 2.65%. All three measures posted month-on-month gains.

The Cofix is a weighted average of funding costs across eight domestic banks — NongHyup, Shinhan, Woori, SC First, Hana, IBK, KB Kookmin and Citibank Korea. It reflects changes in interest rates on deposit and savings products, as well as bank bonds, that banks take in. When banks' funding costs rise, the Cofix follows, and variable mortgage rates benchmarked to it can be adjusted upward accordingly.

The new-loan Cofix captures only funds newly raised in a given month, meaning it responds relatively quickly to shifts in market rates. The outstanding-balance and new outstanding-balance measures, by contrast, incorporate existing funding as well, so they tend to reflect market-rate movements more gradually.

The short-term Cofix hovered between 2.88 percent and 2.91 percent over the past four weeks. It is calculated based on short-term funds with a three-month maturity.

Major commercial banks are set to apply the newly disclosed Cofix rate to variable rates on new housing loans as early as Wednesday.


rim@heraldcorp.com