M o r t g a g e I n d e x e s
9/24/2013: About the 3 and 6 month CD rates. A number of astute readers have e-mailed us about rates on the 3 and 6 month certificates of deposit; we've published a rate of 0.00 for a number of weeks now. The data are compiled from the Federal Reserve's H.15 report. Due to historically low interest rates, these CDs are not trading very actively in the secondary market, and so the Fed has stopped reporting these figures. This also means that we will be unable to publish the CODI shortly as well. We apologize for the inconvenience, and we'll begin publishing again when the data becomes available.
There are many possible ARM indexes. Each one has distinct market characteristics and fluctuates differently. The most common indexes are:
- Constant Maturity Treasury (CMT or TCM )
- Treasury Bill (T-Bill )
- 12-Month Treasury Average (MTA or MAT )
- Certificate of Deposit Index (CODI )
- 11th District Cost of Funds Index (COFI )
- Cost of Savings Index (COSI )
- Wachovia Cost of Savings Index (W-COSI )
- Wells Fargo Cost of Savings Index (W-COSI )
- London Inter Bank Offering Rates (LIBOR )
- Certificates of Deposit (CD ) Indexes
- Bank Prime Loan (Prime Rate )
CMT. COFI. and LIBOR indexes are the most frequently used. Approximately 80 percent of all the ARMs today are based on one of these indexes.
The other indexes, that can
be used as benchmarks for some types of mortgage loans, are:
If you're deciding which index is better you should understand that there probably is no such thing as a "good" index or a "bad" index. Each index has its advantages and drawbacks, and is used in different situations. Generally, a loan tied to a lagging index (COFI, e.g.) is better when rates are rising. Leading index loans, like those tied to CMT, are best during periods of declining rates.
If you'd like to see how the index for any ARM you are considering has changed in recent years you can find historical values for most popular ARM indexes on our site. Data are available beginning from January, 1990. If you need historical data prior to 1990, click here .
We have developed several search, comparison and prediction tools and calculators to help you explore the advantages and disadvantages of different types of ARM indexes available today:
The best way to judge an index is to study its past performance. The historical graph below can help you to get an idea of how the most often used indexes perform over interest rate cycles.
Historical performance of the five most popular ARM indexes. < Obtaining Permission to Reproduce >
Interest Rate Forecasting: Economic Indicators
Interest rates on residential mortgages and U.S. Treasury securities can be influenced by monthly changes and the longer-term trend changes of economic indicators.
Will Mortgage Rates Rise or Fall?