South Korean mortgage-backed lending rates are approaching the significant 5 percent level after a steady rise following the upturn in benchmark money-market rates.

As of Tuesday, the rate on variable-rate home loans, popular with homeowners who are refinancing their mortgages, gained by 0.01 to 0.07 percentage point from the end of last month, touching the mid-to-high 4 percent range.

Top commercial banks and other COFIX members decided to raise their home loans again on Tuesday. The Cost of Funds Index on which banks calculate their mortgage loan interest is designed to reflect a variety of funding costs, including yields on bank bonds and deposit rates at nine major banks.

Shinhan will raise the rate on its variable-rate mortgage loans by 0.01 percentage point from the 2.82 to 4.13 percent range to the 2.83 to 4.14 percent range. Several others will follow suit with Woori’s up from the 2.87 to 3.87 percent range to the 2.88 to 3.88 percent range, Hana’s up from the 3.02 to 4.10 percent range to the 3.03 to 4.11 percent range, and NH’s from the 2.61 to 4.21 percent range to the 2.62 to 4.22 percent range.

KB set the hike at 0.05 percentage point which includes a 0.04 percentage point rise in additional interest rate on top of the one-hundredth percent COFIX rate ratcheting. As a result, the bank’s mortgage rate will rise from the 3.10 to 4.30 percent range to the 3.15 to 4.35 percent range, higher than those of other banks.

On Monday, Korea Federation of Banks announced the COFIX on new home loans stood at 1.48 percent in June, up by 0.01 percentage point from a month ago, extending a rise for the second straight month from April. The increase reflected market expectations as the U.S. Federal Reserve ratchets up interest rates and the European Central Bank announced tightening on monetary policy, as well as increased geographical risk after North Korea’s missile provocations.

By Park Yoon-ye

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