By Kim Jae-won
Staff Reporter
The mortgage interest rate for new customers has fallen below the 4 percent mark for the first time due to the introduction of a new mortgage rate-setting scheme known as the Cost of Funds Index (COFIX).
The COFIX is a new benchmark rate, which is designed to reflect a variety of funding costs, including yields on bank bonds and deposit rates at nine major banks ― Nonghyup, Shinhan, Woori, SC First, Hana, IBK, KB, KEB and Citibank Korea.
The government introduced the new scheme in February as mortgage rates did not fall in tandem with market rates, with yields on certificate of deposits (CDs) failing to reflect lenders’ funding costs.
Kookmin Bank reported its annual mortgage rate for new customers based on COFIX ranges between 3.82 percent and 5.22 percent, down 0.36 percentage points from the previous month.
Korea Exchange Bank also released a COFIX-based mortgage rate; it charges 3.65 percent to 4.99 percent, which were 0.67 percentage points and 1.07 percentage points less than the previous month, respectively.
Woori Bank also said their COFIX mortgage rates are between 3.86 percent and 5.28 percent, while Industrial Bank of Korea said its rate is from 3.94 percent to 4.74 percent.
However, Shinhan Bank and Standard Chartered First Bank have kept their COFIX mortgage interest rates above 4 percent. Shinhan said their mortgage rate is between 4.16 percent and 4.96 percent, and SC First said it is from 4.46 percent to 5.56 percent.
Customers moved to the new index fast to reduce the cost of interest. The total balance of COFIX mortgages at seven major lenders ― KB, Shinhan, Woori, Hana, IBK, KEB and Nonghyup ― reached 2.9 trillion won Thursday, up 75.5 percent from March.
Analysts said the reduced mortgage rate will benefit low-income and middle-class families.
"The lowered mortgage rate is good news for the low-income and middle-class families. However, the housing market is depressed now, so new demand will not increase that much,’’ an economist at LG Economic Research Institute said.
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