Cost of Funds Index's Decline Appears to Be at an End

The recent rise in interest rates has apparently brought a crashing halt to the rapid decline in the Eleventh Federal Home Loan District Cost of Funds Index. In fact, COFI, a weighted average of the cost of mortgage funds for thrifts that belong to the Federal Home Loan Bank of San Francisco, had its second largest increase ever between April and May. The index for May is 1.832%, a rise of some 45 basis points over April's 1.380%, which was the all-time low point. In a five-month period prior to May, COFI fell 177.5 basis points. The only larger increase in COFI, based on data from the FHLB-SF website, occurred between May and June in 1982, when the index rose 51 basis points. Between September and October in 2008, what is now the fourth largest all-time increase in COFI took place, as the index increased by 36 basis points.