The USD LIBOR (London Inter Bank Offering Rates)
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The LIBOR
The US Dollar Libor rate is a popular benchmark for mortgage interest rates in Florida and across the USA. The LIBOR is an international index and is the most famous barometer for short-term interest rates in the world
The London Inter Bank Offering Rate (LIBOR) is an average of the interest rate on dollar-denominated deposits, also known as Eurodollars, traded between the most credit-worthy banks around the world. The Eurodollar market is a major component of the International financial market and London is the center of the Euromarket in terms of volume.
Although the USD Libor rate is popular, there are a number of different indexes that are used by lenders in Florida and some of these are explained below.
Cost Of Savings Index (COSI)
The Cost of Savings index is considered to be among the most stable ARM indexes in the industry.
The COSI is the weighted average of the rates of interest on the deposit accounts of one of the largest federally insured savings, loans and investment corporations in the USA with over $115 billion in assets.
The corporation receives money from consumers in the form of deposits and lends money as home or other loans. The interest rates in effect on these deposits are the basis for the COSI index. It is not based on actual interest paid, but an average of all interest rates in effect on the corporations deposit accounts on the last day of each month.
The COSI adjusts monthly and has a one-month reporting lag. It is computed on the last day of each calendar month and is announced on or near the last business day prior to the fifteenth day of the following calendar month.
A History of Rates
| From | Jan 05 | August 05 | Point Change |
| COSI | 2.08% | 2.78% | +0.7% |
| USD LIBOR | 2.57% | 3.83% | +1.26 |
| B of E Base Rate | 4.75% | 4.5% | -0.26% |
| From | Jan 04 | August 05 | Point Change |
| COSI | 1.85% | 2.78% | +0.93% |
| USD LIBOR | 1.14% | 3.83% | +2.69% |
| B of E Base Rate | 4.03% | 4.5% | +0.47% |
| From | Feb 01 | Feb 04 | Point Change |
| COSI | 5.54% | 1.85% | -3.69% |
| USD LIBOR | 5% | 1% | -4.9% |
| B of E Base Rate | 5.75% | 4% | -1.75% |
Since 1999 Variances
| Index | Minimum | Maximum | Variance |
| COSI | 1.85% | 5.54% | 3.69 |
| USD LIBOR | 1.1% | 6.8% | 5.7 |
| B of E Base Rate | 3.5% | 6% | 2.5 |
Certificate of Deposit Index (CODI)
A CODI loan is based on one of the most stable indexes currently available. Simply put, it is the aggregate sum of what banks are paying to their depositors on their 3-month certificate of deposit accounts. A certificate of deposit account is a type of savings account offered in the US where clients agree to pay in a certain amount of money for a set period of time, with penalties for withdrawing the money early in return for a high interest rate.
The index is calculated by averaging the daily values for 3-month certificate of deposits and then adding the average daily values for one month, dividing the answer by the number of days in the month to arrive at a monthly value. This is then added to the previous eleven months figures and divided by twelve to give the current CODI index.
Information on monthly yields on 3-month certificates of deposit (secondary market) is published by the Federal Reserve Board.
Treasury Bill (T-Bill) indexes
These indexes are based on the results of auctions that the U.S. Treasury holds for its Treasury bills, notes and bonds. Treasury bills are issued by the U.S. government with maturities of 1, 3 and 6 months (4-week, 13-week, 26-week bills) in order to pay for the national debt and other expenses.
The 3- and 6-month Treasury bills are auctioned every Monday and the resulting figures are released to the public the next day. During the auction period, the rates move up and down based upon the average bid at the auction. The bids are made at discount from face value. Example: A bidder offers $9750 on a $10,000 T-Bill. In 6 months the bidder would receive $250. This difference would represent the yield on the rate of return on the T-Bill investment. The Treasury Department computes the average of all of the discounted bids received during that auction. This is translated into the "average yield." This average yield is used to compute the 6 Month T-Bill Index.
The Treasury Bill indexes are reported by the Federal Reserve Board. The T-Bill indexes move with the market and respond quickly to economic changes. In general, the 3 month T-bill tends to have the lowest index value due to the least amount of risk to the bank.
