A cost of funds index or COFI is a regional average of interest expenses incurred by financial institutions, which in turn is used as a base for calculating

variable rate A floating interest rate, also known as a variable or adjustable rate, refers to any type of debt instrument, such as a loan, bond, mortgage, or credit, that does not have a fixed rate of interest over the life of the instrument. Floating intere ...

loans. The interest rate on an

adjustable rate mortgage A variable-rate mortgage, adjustable-rate mortgage (ARM), or tracker mortgage is a mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets.Wie ...

, for example, is often linked to a regional COFI specified in the particular loan documents. COFIs, in turn, are usually calculated by a self-regulatory agency like

Federal Home Loan Banks The Federal Home Loan Banks (FHLBanks, or FHLBank System) are 11 U.S. government-sponsored banks that provide liquidity to the members of financial institutions to support housing finance and community investment. Overview The FHLBank System was ...

. In California, for example, many home

mortgage loan A mortgage loan or simply mortgage (), in civil law jurisdicions known also as a hypothec loan, is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any p ...

s are indexed to the Federal Home Loan Bank of San Francisco. Interest rates on COFI loans and mortgages tend to fluctuate more slowly than variable-rate loans linked to other indexes. An index used to determine interest rate changes for some adjustable-rate mortgages. The 11th District Cost of Funds Index was first introduced in December 1982. It is a National Monthly Median Cost of Funds defined as interest (dividends) paid or accrued on deposits for Western American Financial Institutions. It is calculated on the last day of the month. Personal finance

cost of funds

interest expanded/average of current and previous years deposit plus borrowings {{Finance-stub