- New loan to offer a rate 0.1%p lower than CD-pegged Bogeumjari loan with interest rate switch option -

On March 17, 2010, Housing Finance (KHFC, CEO Joo-jae Lim) announced that a new Bogeumjari loan scheme pegged to COFIX and with an interest rate switch option will be offered starting Monday, March 22, 2010.

The Bogeumjari loan pegged to the COFIX with an interest rate switch option is a mixed interest rate scheme. During the initial variable interest rate period (first year), the loan is applied at a variable rate pegged to the COFIX. Afterward, borrowers have the option of switching to a fixed interest rate at a time of their choosing. Otherwise, upon expiration of the initial variable rate period, the loan automatically shifts to a fixed rate. Other conditions such as loan maturity, loan-to-value (LTV) ratio, and debt-to-income (DTI) ratio remain the same as the existing loan pegged to the CD.

The rate during the initial variable rate period is set at a spread of 1.51%p over the COFIX rate on new loans as announced by the Korea Federation of Banks, with the variable rate changing every six months. Based on the COFIX rate on new loans of March 15, 2010, the initial rate is set at 5.13%, which is 0.10%p lower than the Bogeumjari loan linked to the CD rate with an interest rate switch option. By taking the interest rate discount option, borrowers can benefit from a rate as low as 4.93%.

Borrowers who had already taken out a Bogeumjari loan linked to the CD rate with an interest rate switch option prior to the launch of the new scheme may switch to COFIX one time only provided that they act by the end of August 2010 and if their remaining variable rate period is one year or longer.