SOFR changes once every business day. The Federal Reserve Bank of New York publishes a new Secured Overnight Financing Rate at roughly 8:00 a.m. Eastern Time each morning, based on repo market activity from the previous business day.1Federal Reserve Bank of New York. Secured Overnight Financing Rate Data If you have a loan tied to SOFR, though, your interest rate does not move every day. Your contract sets a reset schedule, and most borrowers see their rate change every one, three, six, or twelve months using an average of SOFR over a defined lookback window.
When the New Rate Posts Each Day
The New York Fed releases SOFR at approximately 8:00 a.m. ET on every business day. The figure it publishes covers overnight repo activity from the prior business day, so Monday’s rate reflects Friday’s transactions. Alongside the daily rate, the New York Fed publishes SOFR Averages and the SOFR Index on the same website shortly afterward.2Federal Reserve Bank of New York. SOFR Averages and Index Data
There is one wrinkle. If the underlying transaction data contains an error or missing information surfaces after the morning release, the New York Fed can republish a corrected rate at approximately 2:30 p.m. ET the same day. Corrections happen only when the revision would exceed one basis point, and a rate is never revised after that same-day window closes.3Federal Reserve Bank of New York. An Updated Users Guide to SOFR Institutions that need the final confirmed number for contract math often wait until after 2:30 p.m. before locking in the day’s value.
SOFR does not publish on Saturdays, Sundays, or days when the Securities Industry and Financial Markets Association recommends a full market closure.4Federal Reserve Bank of New York. Additional Information About Reference Rates Administered by the New York Fed It is published on SIFMA early-close days. When a federal holiday falls on a weekday, no new rate is released for that date, and the next business day’s publication reflects the last trading day before the gap. SIFMA’s holiday schedule is the standard reference for predicting when publication will pause.5Securities Industry and Financial Markets Association. Holiday Schedule
What Actually Moves SOFR Day to Day
Daily swings come down to supply and demand in the overnight repo market. When many dealers need cash at once and Treasury collateral is plentiful, the rate rises. When cash is abundant, the rate drops. Most day-to-day movement stays within a few basis points.
Over any longer stretch, Federal Reserve monetary policy is the bigger driver. SOFR tracks closely with the effective federal funds rate, and when the Federal Open Market Committee raises or lowers its target range, SOFR follows within a day or two.6Board of Governors of the Federal Reserve System. Historical Proxies for the Secured Overnight Financing Rate If you want to anticipate where your SOFR-linked loan rate is heading, watch the Fed’s rate decisions more than the daily fluctuations in SOFR itself.
Quarter-End Spikes
SOFR has a well-documented tendency to spike at the end of calendar quarters, and to a lesser degree at month-ends. Some repo dealers pull back from lending at these dates to clean up their balance sheets for reporting purposes, which temporarily reduces the supply of overnight cash. In recent years, SOFR has jumped as much as 25 basis points above its normal level at quarter-end before settling back on the next business day.7Board of Governors of the Federal Reserve System. What Happens on Quarter-Ends in the Repo Market These spikes look dramatic on a chart but rarely reach consumer loan rates, because loan contracts typically average SOFR over weeks or months rather than sampling a single day.
How SOFR Movement Becomes a Change in Your Loan Rate
Your loan contract sets a reset period that dictates how often your interest rate can actually change. Residential adjustable-rate mortgages commonly reset every six or twelve months. Commercial credit facilities may reset monthly or quarterly. Between resets, SOFR can move all it wants and your rate does not budge.
The Average, Not the Daily Rate
Most consumer ARMs reference a compounded SOFR average published by the New York Fed rather than raw overnight SOFR. The 30-day average is common for loans that reset monthly, while the 90-day and 180-day averages appear in loans with quarterly or semiannual resets.2Federal Reserve Bank of New York. SOFR Averages and Index Data Averaging smooths out the daily noise, including quarter-end spikes, so a single high day does not flow through to your payment.
Some commercial and syndicated loans use Term SOFR instead, a forward-looking rate published by CME Group in one-, three-, six-, and twelve-month tenors.8CME Group. Term SOFR The Alternative Reference Rates Committee recommends overnight SOFR and SOFR averages for consumer products like adjustable-rate mortgages and student loans.9CME Group. CME Term SOFR Reference Rates – Frequently Asked Questions Check your loan documents to see which version applies, because the two are not identical on any given day.
The Lookback Period
Contracts also include a lookback that identifies the specific date pulled for the reset. For government-backed ARMs, a 45-day lookback is standard. Ginnie Mae, for example, requires issuers to use the SOFR value in effect 45 days before the mortgage rate adjustment date.10Ginnie Mae. Ginnie Mae MBS Guide Chapter 26 – Adjustable Rate Mortgage Pools and Loan Packages The lookback gives the servicer time to calculate the new payment, generate statements, and mail notices before the adjusted amount comes due. It also means the SOFR level on your actual adjustment date is not the level that sets your rate.
Your Margin Never Changes
Your loan rate is the applicable SOFR figure plus a margin, a fixed number of percentage points that stays the same for the life of the loan.11Consumer Financial Protection Bureau. For an Adjustable-Rate Mortgage ARM, What Are the Index and Margin, and How Do They Work If your margin is 2.00% and the applicable SOFR average is 3.70%, your rate for that period is 5.70%. The margin was set at closing based on your creditworthiness and the lender’s pricing, and it does not move with the index.
Limits on How Much Your Rate Can Change
SOFR-based ARMs include caps that constrain how far your rate can move at any single reset and over the loan’s lifetime. Most ARMs carry three:
- An initial adjustment cap limits the first rate change after the fixed-rate period ends, commonly two or five percentage points above or below the initial rate.
- A subsequent adjustment cap limits each rate change after the first, most often one or two percentage points per adjustment period.
- A lifetime cap limits the total rate increase over the entire loan, with five percentage points above the initial rate being the most common ceiling.
A loan described as having a “2/1/5” cap structure can move up to 2 points on the first reset, 1 point on each later reset, and no more than 5 points total over the life of the loan.12Consumer Financial Protection Bureau. What Are Rate Caps With an Adjustable-Rate Mortgage ARM, and How Do They Work Even if SOFR shoots up between resets, these caps put a hard ceiling on the change you will see.
Some loans also include a floor, a minimum below which your rate will not drop regardless of how low SOFR goes. Floors protect the lender’s margin and mean you will not fully benefit when rates fall. If your loan has a floor, the lender should also offer a version without one so you can compare the tradeoff.13Consumer Financial Protection Bureau. If I Am Considering an Adjustable-Rate Mortgage ARM, What Should I Look Out for in the Fine Print
Advance Notice Before Your Rate Changes
Federal regulation requires your lender or servicer to notify you before an ARM rate adjustment takes effect. Under Regulation Z, the disclosure must arrive at least 60 days, but no more than 120 days, before the first payment at the new rate is due.14eCFR. 12 CFR 1026.20 – Disclosure Requirements Regarding Post-Consummation Events For ARMs that adjust every 60 days or more frequently, or for certain older loans with short lookback periods, the window shortens to at least 25 days before the new payment is due.
The notice must include your current and new interest rates, current and new payment amounts, and an explanation of how the rate was determined, including the specific index used and the margin added to it.14eCFR. 12 CFR 1026.20 – Disclosure Requirements Regarding Post-Consummation Events Compare the math to your loan agreement when the notice arrives. If the applicable SOFR value plus your margin does not equal the rate quoted, contact your servicer before the new payment takes effect. Errors in reset calculations happen, and catching them early is easier than disputing them after payments have posted.