Drop in COFI Helps Mortgage Holders

The cost of funds index for savings institutions in the 11th Federal Home Loan Bank District fell to 3.368% in November, lowering monthly payments on adjustable-rate mortgages in California, Arizona and Nevada.

The index, called COFI, was at 3.628% in October and fell from 5.617% in December last year as the Federal Reserve cut its key interest rate 11 times to boost the economy.

The November index sets payments on adjustable-rate mortgages through January. It measures the interest paid by thrifts in the district on deposits, advances from the home loan bank and so-called more costly purchases of short-term funds.

The index is used as a base rate for West Coast mortgages and for bonds backed by those loans. A decrease lowers monthly mortgage payments for homeowners and reduces the interest income on bonds backed by mortgages pegged to the index.