The Cost of Funds Index (COFI) for the month of October fell 34 basis points from the prior month to 3.628%, according to the Federal Home Loan Bank of San Francisco (FHLB). The FHLB, which is the 11th of 12 Savings Institution Districts, announces the monthly average at the end of the following month.

The COFI is a ratio of monthly interest costs to total funds. It has fallen each month since December of 2000, and it has not been this low during any period reported by FHLB since prior to 1970.

Last week, Freddie Mac reported that the average 1-year adjustable rate mortgage (ARM) rose slightly to 5.22% from 5.18% the prior week.

The monthly COFI reflects the actual interest expenses recognized during a given month by all savings institution members of the FHLB of San Francisco, and is one of many indices used by mortgage lenders such as Washington Mutual and World Savings as an ARM index.

Shares of Washington Mutual (NYSE: WM) and Golden West Financial Corp. (NYSE: GDW), parent of World Savings, fell at one point last month because investors worried that the Treasury Department's decision to suspend issuance of 30-year bonds might cause mortgage rates to decline faster than the borrowing costs of thrifts, according to Dow Jones Newswires (DJ).