Cost of Savings Index (COSI) Explained:

This index is based on the weighted average of all interest rates paid on CD’s (certificates of deposit) held by Wachovia's individual depositors as of the last business day of each month. This index is specific to the banking or financial institution. This index is reflective of the rate the bank is willing to pay individuals or institutions for deposited funds. Reporting behind this rate is based upon the availability of the financial institutions reports and the index typically lags about 1 month.

This index (COSI) is the weighted and annualized average of all interest rates in effect on all saving deposit accounts on the last day of each month respectively. The rate is adjusted for the effects of financial instruments related to deposit accounts and other adjustments determined by the bank to accurately reflect the weighted average of interest rates on the deposit accounts.

What does the COSI (cost of savings index) mean for a mortgage borrower?

A popular index used for certain adjustable-rate mortgages (ARMs). The index is a weighted average of the rates of interest on the deposit accounts (sometimes called cost of savings) of the federally insured depository institution subsidiaries of Golden West Financial Corporation (GDW). These subsidiaries currently operate under the name World Savings. GDW computes the COSI on the last day of each calendar month and announces it on or near the last business day prior to the fifteenth day of the following calendar month.

How can this help you when selecting a mortgage? The COSI is a relatively stable index where it’s not as volatile as some other mortgage indexes may be. On a side note, but it’s stable nature it also tends to lag other mortgage related indexes when it come to adjusting to cycles and adjusting to changing interest rates.