Will The Real Rate Please Stand Up!

Headlines meant for clickbait disrupt feelings of stability. That’s it, that’s the bottom line. Does it matter if the rate is 6.92% or 6.6%? I don’t know. The buyers who came charging out of the gate as the calendar turned over didn’t seem to care, but there are many others who, regardless of the rate, are intimidated by the unknown. Would it help you to know why there are different rates published in the headlines?

Let’s break it down.

Using the chart below, I can publish a 6.6% rate from Freddie Mac on the same day I quote MBA’s 6.75% or Mortgage News Daily’s 6.95%. I chose to follow the later, MND because I believe it’s the most timely and accurate, but I want to lay out the differences and you choose. Note: all of these are averages.. meaning there are rates below and above; so they give a good sense of direction, but might not tell us the actual rate your borrower can lock in.

Let’s start with Freddie Mac as it’s the longest running survey of mortgage rates in the United States. Freddie analyzes mortgage rates offered to borrowers who put 20% down and have excellent credit. This survey is submitted by loan officers from various lenders across the country and includes discount points paid by borrowers. They gather the data weekly from Monday through Wednesday and publish on Thursday. Since the data set includes three days of survey responses and discount points, swings in rates are muted.

The Mortgage Bankers Association, or MBA rate, is the retail and direct lender reported rate as part of their weekly mortgage applications survey. Data is collected the previous Saturday at midnight through that Friday then released the following Wednesday morning at 7am. While I love the mortgage purchase application data to measure changes in buyer demand activity, this is my least favorite rate index given it’s age.

Then there’s Mortgage News Daily. MND analyzes applications across lenders daily and adjust rates to account for buy-downs. Their applications are borrowers with 760+ credit scores and 25% cash down. The result is a single rate that corresponds to the effective rate that a top-tier borrower/scenario is most likely going to see on the same day it is published.

Why do you as a real estate agent need to know this? Because a borrower today will read headlines that rates dropped to 6.6% based on Freddie, yet get quoted 6.9% from their lender. And it is not bait and switch.. it is click bait.

Bottom line: partner with a lender who understands the market and educates your buyers.