This means a borrower whose adjustable-rate mortgage is indexed to COFI is seeing less volatility in the interest rate on his or her loan compared with other variable rate products. That lack of volatility is the main selling point for using this index.
May was the month where interest rates started increasing as investors believed the Federal Reserve was ready to start to taper its securities purchases. While COFI has remained flat, Freddie Macís weekly mortgage rate survey shows the 5/1 ARM for the first week of May at 2.56%. It crosses above the 3% threshold the week of June 27 and peaks at 3.28% the week of Sept. 5. The rate is at 3.03% for the first week of October.
The 30-year fixed-rate mortgage started at 3.58% and peaked at 4.58% the week of Aug. 22, the Freddie Mac survey finds.
The COFI data does not include the margin that lenders add to the index rate when they originate a loan.