Cost of Funds Index Climbs in May

The cost of funds index for savings institutions in the 11th District rose to 4.864% in May from 4.822% in April, the Federal Home Loan Bank said. The index measures the interest paid by thrifts in the district on deposits, advances from the FHLB and more costly purchases of short-term funds. It is also used as a base rate for West Coast mortgages and, therefore, for bonds backed by those loans. A rise in the index reduces the disposable income of homeowners who have adjustable-rate mortgages by increasing their monthly mortgage payments. For bondholders, a rise in the index increases the interest they receive on their adjustable-rate mortgage securities. The 11th District consists of California, Arizona and Nevada.