COFIX rises for second straight month, pushing up variable mortgage rates

COFIX, the benchmark funding-cost index banks use to set variable rates on home mortgage loans, rose for a second consecutive month, signaling higher borrowing costs ahead for homeowners with floating-rate mortgages.

According to the Korea Federation of Banks, the new-loan COFIX for May came in at 2.90 percent per annum, up 0.01 percentage point from April's 2.89 percent. The index had already climbed 0.08 percentage point in March, marking the second straight monthly increase. The outstanding-balance COFIX also edged up 0.02 percentage point, from 2.87 percent to 2.89 percent.

COFIX is a weighted average of the funding costs incurred by eight domestic banks. It reflects changes in interest rates on deposit and savings products — including time deposits, installment savings accounts and bank bonds — that banks use to raise funds.

When COFIX falls, banks can secure funds while paying less in interest. When it rises, they must pay more, a cost typically passed on to borrowers through higher variable mortgage rates.

Both the new-loan and outstanding-balance COFIX figures are calculated based on rates on a range of deposit products, including time deposits, installment savings, mutual installment savings, housing installment savings, certificates of deposit, repurchase agreements, cover bills and financial bonds (excluding subordinated and convertible bonds).

The "new outstanding-balance COFIX," introduced in June 2019, rose from 2.49 percent to 2.50 percent. That measure also incorporates rates on other deposits, borrowings and settlement funds.