ARM Loan Rate Falls to Lowest in 10 Months

The 11th District cost of funds--the rate to which many adjustable-rate mortgages are tied--edged lower to 5.198% in March from 5.426% in February, the Federal Home Loan Bank in San Francisco reported. The rate tends to lag changes in market interest rates, such as those being cut by Federal Reserve policymakers, by several months. The March reading was the lowest the rate has been since May 2000, when it was 5.196%. The rate measures the average cost of funds for the savings institutions in the federal bank system’s 11th District, which includes California, Arizona and Nevada. In a separate report, the Federal Reserve said the average yield for one-year constant maturity Treasury bills, the most-popular index for making changes in ARM loans, fell to 3.82% last week from 4.04% the previous week.