COFIX (cost of funds index), the benchmark for variable rates on mortgage loan in the banking sector, rebounded again after a month.
According to the Korea Federation of Banks on the 16th, the COFIX based on new fundings in February was 2.82%, up 0.05 percentage points from the previous month (2.77%). It had risen for four consecutive months since September last year, then fell in January, but turned upward again after a month.
However, the balance-based COFIX stayed at 2.85%, the same level as the previous month. COFIX is the weighted average interest rate on funds raised by eight domestic banks: NongHyup, Shinhan, Woori, SC First, Hana, Industrial Bank of Korea, KB Kookmin, and Korea Citibank. When the rates on major deposit products handled by banks, such as savings and installment savings, and bank bonds rise or fall, COFIX rises or falls accordingly.
COFIX includes time deposits, installment savings, mutual installment savings, dwellings installment savings, certificates of deposit, repurchase agreements, cover bill sales, and financial debentures (excluding subordinated and convertible bonds). The new balance-based COFIX, introduced in June 2019, fell 0.01 percentage points from the previous month to 2.47%. The new balance-based COFIX additionally includes other deposits, other borrowing fund, and settlement funds.
Because the new funding COFIX targets the funds newly raised by banks during the previous month, changes in market interest rates are reflected quickly. In contrast, the balance-based and new balance-based COFIX reflect market rate changes more gradually.