Seoul: The average lending rate of major banks in South Korea dropped for the sixth consecutive month in March, data showed Tuesday. COFIX, or the Cost of Funds Index, a benchmark lending rate for mortgage loans, came to 2.84 percent last month, down 0.13 percentage point from the previous month, according to the data from the Korea Federation of Banks.
According to Yonhap News Agency, COFIX is calculated based on the funding costs by eight domestic banks in South Korea. These banks include Nonghyup Bank, Shinhan Bank, Woori Bank, and Citibank Korea. In February, the Bank of Korea lowered its policy rate by a quarter-percentage point to 2.75 percent, marking the third reduction in the current monetary easing cycle after the policy pivot in October. The central bank has hinted at up to two additional interest rate cuts this year in an effort to spur economic growth.
The bank is set to hold a rate-setting meeting this week. Household loans extended by South Korean banks rose for the second consecutive month in March amid rising housing prices in the affluent districts of southern Seoul following state deregulatory moves. Banks' outstanding household loans rose by 1.4 trillion won (US$985 million) last month from a month earlier, according to the data from the Bank of Korea (BOK). The rate of growth slowed from a 3.2 trillion-won surge in February. March's increase came as banks eased some regulations at the beginning of the year, while demand for loans grew during the moving season.