#Mr. A, who received a 249 million won home loan from a bank on the 15th, and Mr. B, who borrowed the same amount one day later on the 16th. Assuming both took out six-month variable-rate home loans under identical conditions, Mr. B will pay approximately 570,000 won more in annual interest than Mr. A. This is because loan rates for some home loan products at certain banks rose by 0.25 percentage points (p) starting on the 16th. The increase follows the largest rise in COFIX (Cost of Funds Index), the benchmark for variable-rate home loans in the banking sector, in three years and ten months.
According to the Korea Banking Association on the 15th, the new-disbursement-based COFIX for September was 3.43%, up 0.25 percentage points from the previous month (3.18%). This is the largest increase since November 2022 (0.36 percentage points). COFIX is the weighted average interest rate on funds raised by eight domestic banks through deposits, savings accounts, and bank bonds, among others, and it affects variable-rate home loan rates that use it as a reference rate.
Immediately, KB Kookmin Bank and Woori Bank will raise their six-month variable-rate home loan rates, based on the new-disbursement COFIX, by 0.25 percentage points each starting on the 16th. Based on the average home loan amount of 249 million won used by financial authorities to calculate the contribution rate for the Housing Credit Guarantee Fund, a 0.25 percentage point increase in interest rates adds approximately 572,700 won to the annual interest burden.
The recent surge in COFIX is interpreted as being influenced by banks' consecutive increases in deposit rates last September. As corporate funds flowed out en masse due to corporate tax payments and other factors, banks raised deposit rates to secure deposits from relatively stable individual customers.
At the end of 2022, when COFIX last rose by such a large margin, banks' funding costs also spiked sharply. At that time, in addition to the Bank of Korea raising its base rate by 0.50 percentage points and 0.25 percentage points in October and November, respectively, the bond market tightened due to the Legoland incident, prompting banks to consecutively raise deposit rates. Consequently, COFIX surged by 0.58 percentage points in October 2022 and 0.36 percentage points in November.
The issue is that there is a possibility COFIX will rise further in the future. This is because banks are raising deposit rates in October as well, following September. In particular, Shinhan Bank launched the "Super SOL Welcome Time Deposit," offering interest rates of up to 4.0%, on the 6th, and Nonghyup Bank also released a special deposit product with interest rates of up to 3.9% on the 13th.
The interest burden for home loan borrowers is already increasing. According to the Korea Banking Association, the average interest rate on new installment-repayment home loans handled by the five major banks—KB Kookmin, Shinhan, Hana, Woori, and Nonghyup—in August was 4.94%, up 0.28 percentage points from the previous month (4.66%). This is the largest increase in one year and ten months since October 2024 (0.40 percentage points).
As of this day, the loan rates for six-month variable-rate home loan products at the five major banks ranged from 4.36% to 6.29%, with the lower end rising by 0.34 percentage points compared to two months ago (4.02% to 6.37%). The decrease in the upper limit was due to Nonghyup Bank independently lowering its rates, while loan rates at the other four banks rose at both the lower and upper ends.
In addition, with the Bank of Korea's Monetary Policy Board decisions on the base rate for October and November still pending, attention is focused on whether further increases will occur. If the base rate rises further, upward pressure will be added to banks' funding costs and home loan rates.
A banking industry official said, "We are seeing a high possibility that the average variable-rate home loan interest rate will exceed 5% by year-end," adding, "Although the growth in household loans is slowing, the burden on borrowers who have already taken out loans will increase significantly."
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