Variable mortgage rates in South Korea to rise as COFIX climbs for second month

The benchmark rate for variable-rate home mortgages in South Korea has climbed for the second month in a row, signaling potentially higher borrowing costs for homeowners. The Certificate of Deposit (CD) rate, known as COFIX, reached its highest point since February of last year in May.

The new COFIX, based on newly acquired funds, rose by 0.01 percentage points to 2.90% in May. This follows a previous increase from 2.81% in March to 2.89% in April. The current rate of 2.90% is the highest recorded since February 2023, when it stood at 2.97%.

Rates based on outstanding balances also saw an increase. The standard outstanding balance COFIX edged up by 0.02 percentage points to 2.89%, while the new outstanding balance COFIX increased by 0.01 percentage points to 2.50%.

COFIX serves as a benchmark for the cost of funds for major South Korean banks. Fluctuations in interest rates for deposits, savings accounts, and bank bonds directly influence this index. An increase in COFIX indicates higher funding costs for banks, which typically translates into higher variable mortgage rates for consumers.