COFIX, the highest ever since its introduction in 2010
The time has come to pay more interest than principal
As the Bank of Korea raises the benchmark interest rate by 0.5 percentage points, the ice age in the real estate market is expected to be long. On the 13th, a red light is on at a traffic light near an apartment in downtown Seoul.
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[아시아경제 심나영 기자] The COFIX, which is the basis of various banks’ interest rates on mortgage loans and interest rates on cheonsei loans, rose to an all-time high. As a result, the floating interest rate for principal deposits and the top end interest rate for deposit loans in commercial banks have exceeded 7%. This is because the COFIX (funding cost index), which is the standard for these rates, has recorded an all-time high since its introduction in 2010, at almost 4%, and the shock was passed on to market interest rates. It is expected that the interest burden of the Youngkkeul clan and the Jeonse family will increase like a snowball.
The Korean Bank Federation announced on the 15th that the COFIX in October 2022 was 3.98% of new transactions last month, up 0.58 percentage points from September (3.40%) the previous month. This is the highest level since 2010, when COFIX disclosure began, and the increase is also the largest ever. Last month, the Bank of Korea carried out a major move (a 0.50 percentage point increase in the base rate), which reflected the increase in the time deposit interest rate, and the increase in bank bond interest rates due to the recent Legoland crisis, driving the increase in COFIX.
Commercial bank interest rates, which immediately reflected the change in COFIX, rose one after the other. From the 16th, KB Kookmin Bank decided to raise the bank’s floating interest rate from 5.18 to 6.58% per annum to 5.76 to 7.16% per annum. The interest rate on deposit loans also rose from 5.24 to 6.64 per cent to 5.82 to 7.22 per cent. Woori Bank’s floating interest rate for the principal debt was raised from 5.74 to 6.54% per annum to 6.32 to 7.12% per annum, and NH Nonghyup also rose from 5.09 to 6.19% to 5.67 to 6.77% per annum.
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Cha Hyeon-joo (43), an office worker, is also worried about the increasing interest burden. “It’s been 2 years since I bought the house, but now the interest is more than the principal I have to repay every month,” he said, “no matter how much I I pay it back, the amount of the refund is somewhat increased, so is my blood. dry.”
When Cha bought an apartment in Namyangju, Gyeonggi Province two years ago, he took out a loan of 400 million won. At the time, the variable interest rate on Mr Cha’s principal debt was 3.10%. The monthly repayment amount was about 1.7 million won (1.1 million won in principle + 600,000 won in interest). The floating rate is recalculated every six months. In 2021, when the interest rate was the lowest, the interest rate went down for a while, but since then, every time I receive a text message from the bank about the interest rate, it started to rise so alarmingly that my heart sank to down .
Mr Cha said, “This Wednesday, the bank told me that the loan interest rate has risen to 6.20%.”
If the Bank of Korea raises the base rate again on the 24th, it is very likely that the loan interest rate will rise to a level close to 8%. When the base interest rate rises, the bond interest rate rises, and the interest rate for fixed loans and unsecured loans, which use this as the benchmark rate, also rises accordingly. The top end of the fixed interest rate and unsecured loan interest rate of the big five banks has already exceeded 7%.
Correspondent Shim Na-young sny@asiae.co.kr
