The reference interest rate for loans is on the rise due to the rise in COFIX and high exchange rates.
“The authorities are still putting pressure on household loans…it is difficult for interest rates to fall by the end of the year.”
Even though the Bank of Korea lowered the base interest rate, bank mortgage loan interest rates are on the rise.
According to the financial sector on the 29th, the fixed mortgage interest rates of the five major banks, KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup, were calculated to be 3.71-6.11% per annum as of today. Compared to the end of last month (3.64-6.15% per year) before the Bank of Korea cut interest rates, the upper end fell 0.04%, but the lower end rose 0.07 percentage points.
In addition, the interest rate on variable mortgages increased from 4.50 to 6.69% per year to 4.53 to 6.88% per year over the same period, increasing by 0.03 percentage points at the lower end and 0.19 percentage points at the upper end.
The main reason for the rise in mortgage interest rates is the rise in the reference interest rate for loans.
Bank loan interest rates are usually calculated as ‘base rate + additional interest rate – preferential interest rate’. The reference interest rate moves according to market interest rates. The additional interest rate is set autonomously by each bank by adding profit to the bank’s costs, such as labor costs and store rent. Preferential interest rates are a benefit provided to people with high incomes and high credit.
COFIX, which is mainly used as the reference interest rate for variable mortgage loans, rose backwards after the Bank of Korea cut interest rates. According to the Korea Federation of Banks and others, COFIX’s new handling amount in September was 3.40%, up 0.04 percentage points from August (3.36%). The downward trend that continued for three consecutive months until August has stopped.
An official from a commercial bank said, “We raised the lending interest rate considerably in July and August due to pressure from the financial authorities to reduce household lending,” and added, “We were concerned that the interest rate gap between deposits and loans would widen too much after that, so we also raised the deposit interest rate.” COFIX reflects the bank’s funding costs, and deposit interest rates account for a particularly large portion.
He predicted, “These days, banks are lowering their deposit interest rates to reflect the Bank of Korea’s interest rate cut,” and added, “Cofix will fall next month.”
The interest rate on 5-year financial bonds, which is mainly used as the reference rate for fixed mortgage loans, also rose. According to the Korea Financial Investment Association, as of the 28th, the interest rate on 5-year financial bonds was 3.32% per year, up 0.12 percentage points from the end of the previous month (3.20% per year).
A bond market official explained, “Because of the high exchange rate these days, interest rates on government bonds are rising,” adding, “As a result, interest rates on financial bonds have also risen.” As the value of the won fell due to the Bank of Korea’s interest rate cut, the won-dollar exchange rate recently rose. Paradoxically, the base rate cut played a role in raising lending rates.
Another main cause is the financial authorities’ strict management of household loans. A high-ranking official in the financial sector said, “Financial authorities are very reluctant to allow household loans to increase again,” and “because of this, banks are also unable to lower lending interest rates.”
Another official emphasized, “In June and July, the bottom interest rate for fixed mortgage loans was in the 2% range and for variable mortgage loans in the 3% range, but as banks began to raise interest rates due to pressure from financial authorities, it rose to the 3-4% range.” He said, “Unless the financial authorities let go of the reins on household loans, banks can raise interest rates further but cannot lower them. Even if the Bank of Korea cuts interest rates again in November, it will be difficult to see a clear downward trend in lending rates by the end of the year.” I looked ahead.
KPI News / Reporter Ahn Jae-seong [email protected]
[저작권자ⓒ KPI뉴스. 무단전재-재배포 금지]
