The Financial Supervisory Service(FSS) has begun a written inquiry into how commercial banks set their interest on loans amid a recent rise in mortgage rates.
 
The financial regulator said Monday that it is focusing on whether the banks have assessed their interest rates reasonably and if benchmark rates such as the cost of funding index or COFIX and bank debentures are linked properly to loan rates.
 
Banks determine mortgage rates by making additions to the benchmark rate. For fixed-rate loans, they typically make additions to bank debenture rates. For variable-rate loans, they add to COFIX rates. The final rate is determined by making adjustments based on the customers' credit worthiness.
 
Commercial banks' mortgage rates have recently been on an upward trend. Annual interest on five-year fixed-rate mortgages have spiked to almost five percent.

An FSS official said that although loan rates have been pressured by a rise in market rates, the burden on consumers shouldn't be excessive. The official said that if necessary, the FSS will conduct on-site inspections after completing the written inquiry.