Which index is used to determine interest rate changes for certain adjustable rate mortgage plans?

The treasury index is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans because it is closely linked to the yields on U.S. Treasury securities. Lenders often use this index to adjust the interest rates on ARMs because it provides a reliable measure of the cost of borrowing long term in relation to government bond rates. This means that as the yields on Treasury securities fluctuate, the rates on the ARMs tied to this index will also adjust accordingly, reflecting the changes in the overall market conditions.

This index is particularly significant for ARMs because it is considered a stable benchmark. The use of the treasury index helps borrowers understand how their mortgage rates will change over time in relation to a generally accepted and objective financial instrument, ensuring that adjustments are based on economic factors rather than arbitrary measures.

The other options, while related to economic indicators, do not serve the same purpose in the context of adjustable-rate mortgages. The Consumer Price Index measures inflation and the cost of living but is not directly tied to interest rate adjustments. The Federal Reserve Index generally refers to different types of monetary policy tools rather than a specific benchmark for ARMs. The Real Estate Index is not a recognized benchmark for determining interest rates on mortgages.