The cost of funds index appears to be nearing the end of its unstoppable decline.
The index was 2.693% in August, the Federal Home Loan Bank of San Francisco reported today. COFI was just slightly lower than 2.698% in July. A year earlier, the index stood at 4.3595%.
COFI has fallen each of the past 11 months and is at its lowest level since June 2005, when it stood at 2.676%. But the decline in August, 0.005%, was just a fraction of the level it had been falling.
FHLB San Francisco calculates COFI based on the interest expense of its members, which are based in Arizona, California and Nevada. During August, $375.6 billion in average total funds were used in the calculation.
COFI is used as an index for adjustable-rate mortgages, which accounted for 4% of applications in the Mortgage Bankers Association's Weekly Mortgage Applications Survey for the week ending Sept. 19. A month earlier, ARM share stood at 8%.
Another ARM index, the 6-month London Interbank Offered Rate, was unchanged from July 30 to Sept. 3 at 3.12%, Bankrate.com reported. As of Sept. 24, LIBOR stood at 3.47%.
The 1-year Treasury yield, which is used as an index on the 1-year ARM, fell from 2.27% on July 31 to 2.17% on Aug. 29, according to data from the U.S. Department of the Treasury. Today, the 1-year yielded 1.78%.