The cost of funds for western banks continued to fall, dragging down a mortgage rate index with it.
The cost of funds index was 2.698% in July, the Federal Home Loan Bank of San Francisco reported today. The index fell from 2.829% in June and 4.277% a year earlier.
The is the 10th consecutive month COFI has fallen. It has not been this low since June 2005, when it stood at 2.676%.
COFI is calculated based on the interest expense of 11th District member banks headquartered in Arizona, California and Nevada -- three of the worst states for foreclosures this year. For July's index, average total funds were $372.0 billion.
A competing index for adjustable-rate mortgage, the 1-year Treasury yield, ended July at 2.27%, down from 2.36% at the end of June. The 1-year yield closed at 2.17% today.
Another competing ARM index, the 6-month London Interbank Offered Rate, was 3.12% on July 30, falling from 3.19% on June 25. Wednesday, the 6-month LIBOR was 3.17%.
ARM applications accounted for 7.9% of all applications tracked by the Mortgage Bankers Association for the week ending Aug. 22.