|It's been four-and-one-half years since the Cost of Funds Index has been this low. The index is out of step with other indices used on adjustable-rate loans.
COFI was 2.003% during February, data released yesterday from the Federal Home Loan Bank of San Francisco indicated. The index fell from 2.455% in January and 3.560% in February 2008.
The last time COFI was this low was in October 2004 -- when it stood at 1.960%.
The index is determined based on the interest expense of FHLB member institutions based in Arizona, California and Nevada. February's index assessed the total interest expense on $84.0 billion in average total funds, up from $82.0 billion in January but a far cry from the $375.6 billion used in August 2008's calculation.
The drop in average total funds suggests that far fewer institutions are having a greater impact on movements in the index -- likely leading to the wild swing in February.
A more broadly used index for adjustable-rate mortgages, the yield on the one-year Treasury, ended February at 0.72% -- higher than 0.51% at the end of January, according to data from the U.S. Department of the Treasury.
The one-year ended last month at 0.57%.
The six-month London Interbank Offered Rate finished February at 1.75%, according to Bankrate.com. At the end of January, LIBOR was 1.68%.
Last week, the six-month LIBOR -- a popular ARM index on subprime mortgages -- was 1.77%.
ARMs accounted for just 1.5% of loan applications tracked in the Mortgage Bankers Association application survey for the week ending March 27, edging up from the prior week's 1.4% share.