Mortgage Indexes

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)
• 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:

• National Average Contract Mortgage Rate
• Semiannual Weighted Average Cost of Funds Index
• Freddie Mac's Required Net Yield (RNY)
• Fannie Mae's Required Net Yield (RNY)
• National Monthly Median Cost of Funds Index
• Quarterly Average Cost of Funds
• Semi-annual National Average Cost of Funds
• Federal Cost of Funds Index

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:

• Frequently Asked Questions: CMT FAQ, T-Bill FAQ, MTA FAQ, COFI FAQ, LIBOR FAQ
• Historical Data (Prior to 1990): COFI History, CODI History, COSI History, MTA History, Prime Rate History, National Avg Contract Mtg Rate History, National Monthly Median COFI History, Federal COFI History, WSJ LIBOR History, FNMA LIBOR History, CMT Monthly History, CMT Daily History
• Index Announcement Dates
• Moving Average Index Values vs. Current Values: 1-, 3-, 9-Year Averages, 2-, 6-, 12-Year Averages, 5-, 10-, 15-Year Averages
• Interest-Only ARM Interest Cost Calculator: Which Index Is Better?
• Historical performance of 16 mortgage ARM indexes: Detailed Comparison Chart
• ARM Index Variability Table for the most recent 12 months.
• The number of times mortgage (ARM) indexes' movement changed direction during each calendar year.
• National Monthly Average Mortgage Rates (FHLMC, HSH, FHFB)
• Projected Future MTA, CODI, COSI, COFI and Prime Rate: Prime Rate Forecast, MTA Rate Forecast, COFI Rate Forecast, COSI Rate Forecast, CODI Rate Forecast

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 six most popular ARM indexes. { Obtaining Permission to Reproduce }

Related Articles:

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  Interest Rate Trends
Three month, one year, three year and long-term trends of national average mortgage rates on 30-, 15-year fixed, 1-year (CMT-indexed) and 5/1 combined adjustable rate mortgages.

  Treasury Market and Mortgage Rates
Yields on 10-year and 30-year Treasury securities are typically used to set long-term mortgage rates.

  Treasury Yield Curve Dynamics
See how the shape of the yield curve changes over time.