Cost of funds index (COFI)
An economic indicator that lenders use to set an adjustable rate mortgage’s interest rate
COFI is one of the more stable indices that lenders use when setting the interest rate on an adjustable rate mortgage (ARM). Interest rates that are based on COFI usually move up and down slowly, which can be an advantage when interest rates are predicted to rocket up. COFI, itself, is the average interest rate that banks in certain states have paid to their customers in recent months. The 11th District COFI, for example, covers banks in California, Arizona and Nevada.