Following the lead of two other indices used for variable rate loans, the Cost of Funds Index improved during the latest month.
The index was 4.233% in October, declining from 4.383% during September, the Federal Home Loan Bank of San Francisco reported Friday. A year earlier, COFI was 4.346%.
The index is calculated using interest expenses from 11th District member institutions headquartered in Arizona, California and Nevada. During the latest month, $395.6 billion average total funds from 25 eligible institutions was used in the computation.
COFI, which is reported about 30 days following the end of each month, is at its lowest level since April, when it averaged 4.224%.
COFI is used as an index for adjustable-rate mortgages. Another ARM index is the 1-year Treasury, which was 3.22% on Thursday, falling well below 4.00% a month earlier. The London Interbank Offered Rate, also used as an ARM index, was 4.86% as of Nov. 28, about 12 basis points lower than the prior month.
ARMs accounted for 14.6% of loan applications, according to the Mortgage Bankers Association's latest survey.