Consecutive COFIX Rises and Mortgage Rate Hikes: Accelerating the 'Money Move' to Tier-2 Financial Institutions
As COFIX rises for two consecutive months, concerns over variable-rate mortgage hikes at major banks are materializing. We analyze the 'money move' phenomenon where demand and capital shift to tier-2 financial institutions amid higher loan thresholds.
Consecutive COFIX Rises and Shifts in the Loan Market
As of May 2026, the COFIX (Cost of Funds Index) based on new handling amounts reached 2.90%, up 0.01 percentage points from the previous month. This reflects the direct impact of higher deposit rates at commercial banks and rising interest rates in the domestic bond market on funding costs. The balance-based and new balance-based COFIX are also maintaining an upward trend, intensifying the upward pressure on loan rates.
Upward Adjustment of Variable-Rate Mortgages at Major Banks
This recent COFIX increase will be immediately reflected in the variable-rate mortgages of commercial banks starting June 16. With the upper limit of fixed-rate mortgages already exceeding 7%, the rise in variable rates further exacerbates the interest burden on borrowers. As the market has already priced in the possibility of the Bank of Korea raising its benchmark interest rate, anticipating a short-term rate cut remains difficult.
The 'Money Move' to Tier-2 Financial Institutions
As lending thresholds at major banks tighten and interest rates climb, loan demand and surplus capital are accelerating their move toward tier-2 financial institutions such as savings banks and community credit cooperatives.
- Deposit Rate Competition: To defend against capital outflows and attract new deposits, tier-2 institutions are aggressively launching high-interest promotional deposit products yielding between 4% and 6% annually.
- Shift in Loan Demand: A balloon effect is observed where borrowers, burdened by reduced lending limits and higher rates at tier-1 banks, are turning to tier-2 institutions for financing.
Market Outlook and Wealth Management Strategy
Given the expectation of continued upward pressure on lending rates, a meticulous comparison of terms is necessary when taking out new loans or refinancing. Borrowers should verify their eligibility for preferential rates rather than focusing solely on the bottom end of the interest rate range. Conversely, for cash holders, capitalizing on the high-interest promotions offered by tier-2 institutions can be a viable strategy to secure stable interest income.