The Cost of Funds Index, or COFIX, which banks use as the benchmark for floating-rate mortgages, rose again as market interest rates climbed.
COFIX based on newly handled loans stood at 3.43% in September, up 0.25 percentage points from 3.18% in August, the Korea Federation of Banks said on the 15th. That is the highest level in two years and three months, since June 2024, when it reached 3.52%. The increase was the largest in three years and 10 months, since a 0.36 percentage point gain in November 2022.
The new-loan COFIX had risen for four straight months from April through July this year before holding steady at 3.18% in August. COFIX based on outstanding balances rose 0.10 percentage points to 3.15% from 3.05%.
COFIX is the weighted average interest rate on funds raised by eight domestic banks, reflecting changes in rates on deposit products such as savings accounts, installment savings and bank debentures that banks have actually issued.
COFIX based on the new outstanding balance standard rose to 2.79% from 2.71%. That measure also includes rates on other deposits, borrowings and settlement funds. Commercial banks plan to apply the COFIX rate released on the 15th to new floating-rate mortgages as early as the 16th.
KB Kookmin Bank will raise its six-month floating mortgage rate tied to the new-loan COFIX to a range of 4.64% to 6.04% from 4.39% to 5.79%. Rates on jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) loans guaranteed by the Korea Housing Finance Corporation, under the same benchmark, will rise to 4.48% to 5.88% from 4.23% to 5.63%. Woori Bank will also lift its six-month floating mortgage rate tied to the new-loan COFIX to 5.00% to 6.20% from 4.75% to 5.95%.
Meanwhile, household loans across the financial sector fell 2.2 trillion won last month, the first decline this year. Total household lending shrank for the first time in nine months as the drop in credit loans widened sharply and mortgage growth slowed.
Household loans across all financial institutions fell 2.2 trillion won in September from the previous month, according to data released by financial regulators on the 15th. It was the first net decline since December last year, when they fell 1.2 trillion won.
Credit loans led the overall decline, falling 3 trillion won. The drop widened from 400 billion won in August to 3 trillion won in September. Mortgages rose 3.3 trillion won, slower than the 4.3 trillion won increase a month earlier.
By sector, household loans at banks rose just 600 billion won, a sharp slowdown from 3.5 trillion won the previous month. Household loans at non-bank financial institutions fell 2.8 trillion won, a wider decline than the 700 billion won drop a month earlier. Regulators attributed the shift to housing market conditions, including fewer transactions and less new supply ready for occupancy, along with seasonal factors such as quarter-end sales and write-offs of bad loans and holiday bonuses.