Key Mortgage Rate Drops to 2-Year Low

The 11th District cost of funds--the rate to which many adjustable-rate home mortgages are tied, and one that lags more recent changes in market lending costs--fell to 4.723% in February from 4.821% in January, the Federal Home Loan Bank of San Francisco reported. It was the rate’s lowest level in more than two years, since it stood at 4.589% in December 1994. Because the rate trails changes in market rates by several months, the 11th District cost of funds doesn’t yet reflect the rise in rates that followed the Federal Reserve Board’s credit tightening a week ago. The rate measures the average cost of funds to financial institutions in the bank’s 11th District, which covers California, Arizona and Nevada.