The Eleventh Federal Home Loan District Cost of Funds Index stands at 3.884% for May, an increase of over 12 basis points from 3.759% in April.Several recent surveys noted that the 30-year fixed mortgage rate was at its highest point in four years. Similarly, COFI is at its highest level since October 2001, when the index stood at 3.628%. It is likely that COFI will continue to rise because the index is a weighted average of what it costs thrifts in California, Arizona, and Nevada to obtain money to originate mortgages. That includes the deposits these institutions gather. As the Federal Reserve Board continues to raise the federal funds rate (the rate banks charge each other for overnight loans), institutions have been increasing the amount they pay for deposits. On top of that, because COFI is a weighted average, it lags movements in other rates by three to six months.

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