| This index reflects the
weighted-average interest rate paid by 11th Federal Home Loan Bank
District savings institutions for savings and checking accounts,
advances from the FHLB, and other sources of funds. The 11th
District represents the savings institutions (savings & loan
associations and savings banks) headquartered in Arizona, California
and Nevada.
Since the largest part of the Cost Of
Funds index is interest paid on savings accounts, this index lags
market interest rates in both uptrend and downtrend movements. As a
result, ARMs tied to this index rise (and fall) more slowly than
rates in general, which is good for you if rates are rising but not
good for you if rates are falling.
The following graph illustrates the
trend for the COFI index to lag other indexes: |
