The cost of funds index reached its lowest level in 28 months.
COFI was 3.280 percent during March, the Federal Home Loan Bank of San Francisco reported Wednesday. The index fell from 3.560 percent in February and 4.299 percent during March 2007.
March marks the sixth consecutive month COFI has fallen, FHLB data indicated. It has not been this low since November 2005, when it stood at 3.190 percent.
The index is based on interest expenses for 11th District FHLB member institutions headquartered in Arizona, California and Nevada. Average total funds used in March's calculation were $406.3 billion.
COFI is used as an index for adjustable-rate mortgages, which accounted for 5.9 percent of all applications tracked by the Mortgage Bankers Association in its survey for the week ending April 25.
Another popular ARM index is the 1-year Treasury, which yielded 1.85 percent yesterday, up from 1.55 percent on May 31, according to U.S. Treasury data.
The 6-month London Interbank Offered Rate, also used as an ARM index, was 2.99% as of yesterday, according to Bankrate.com. A month earlier, LIBOR stood at 2.62 percent.