Borrowers to face increased interest burden as Cofix rises

(Korea Federation of Banks)

The Cost of Funds Index (Cofix) in South Korea, the benchmark for short-term financing cost, rose for a fourth consecutive month in December, signaling further increases in borrowing costs for households.

According to the Korea Federation of Banks said on Thursday, the Cofix, based on new loans, stood at 2.89 percent in December, up 0.08 percentage point from 2.81 percent in November. The index has been on an upward trend for four straight months since September 2025.

In November, the rate had already jumped sharply to 2.81 percent from 2.57 percent the month before, and the upward momentum continued into December.

The new-issuance Cofix reflects only funds newly raised during the relevant month, meaning it responds relatively quickly to changes in market rates and banks’ deposit rates.

By contrast, the outstanding-balanced Cofix rose only marginally, by 0.01 percentage point to 2.84 percent in December.

The new outstanding-balance Cofix slipped 0.01 percentage point to 2.47 percent.

Cofix is calculated as a weighted average interest rate of funds raised by eight major domestic banks – NH Nonghyup, Shinhan, Woori, SC First Bank, Hana, IBK, KB Kookmin, and Citibank Korea.

A rise in Cofix means banks are securing funds at higher interest costs, while a decline indicates they are raising funds more cheaply.

Commercial lenders are expected to begin applying the newly announced Cofix rate to variable-rate mortgage loans as early as Friday.