Adjustable Rate Mortgage Indexes – Which one is better?

There are many possible ARM indexes. Each one has distinct market characteristics and fluctuates differently. The most common indexes are 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.

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, like the COFI, 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 this site.

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