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No, Mortgage Rates Are NOT LOWER Today!

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Without a doubt, Mortgage rates Today is significantly higher than yesterday. Yesterday was also significantly higher than Tuesday. Finally, and most importantly for the purposes of this article, today’s rates are undisputedly higher than at the end of last week (this applies to both Thursday and Friday).

In other words, they are higher whether you are looking at today’s rates compared to yesterday, the end of last week, or just weekly rates.

Whose price is it? Almost all lenders. The above exceptions are not seen across the scores on the ratesheets that are reviewed daily to generate the MND rate index. These rate sheets conservatively cover 95% of the market.More importantly, as long as you understand it Mortgage rates It is primarily based on the value of mortgage-backed securities in the secondary market, which is a simple calculation.Today’s MBS price Lower than any of the last 4 business days (low price = high rate).

Now for a big question: Why are there so many news headlines about significant declines? Mortgage rates??

answer: So many reporters rely on Freddie Mac’s weekly mortgage rate survey as the sole source of mortgage rate information. For more normal hours, this strategy is sufficient. Mainstream consumers of financial news do not specifically need new daily rate updates (unless they are home shopping). And Freddie’s data is great for capturing a wide range of long-term trends in rates.

Unfortunately, Freddie’s research data does a terrible job of capturing changes in interest rates when bond volatility is unusually high. In fact, surveys tend to stumble due to the average volatility of the week, most of which moves from Wednesday to Friday.

To understand why, we should first consider sending a survey on Monday morning. Responses will be accepted until Wednesday and the results will be published on Thursday. This is a problem for several reasons. First, Wednesday’s response has no additional weight (for example, if 1000 people say 6.0% on Monday and 1000 people say 7.0 on Wednesday, Freddie’s survey rate will be available even if 6.5 is unavailable. Will be 6.5).

The biggest issue is the timing of the response. Freddie hasn’t released a specific breakdown, but Freddie’s as someone who draws rates from multiple lenders several times a day and scrutinizes the average change in rate sheet offerings over a decade. We can confidently guarantee most of the answers received on Monday and the minority will be received on Wednesday. Conversations with lenders participating in this survey confirm this. Their logic is … logical-something to the effect that “I will respond when I receive an email.” Also, the email will be sent on Monday.

The net effect is that Freddie Mac’s weekly rate survey is similar to the “Monday vs. Monday” rate survey. If the results were announced on Monday, if the industry as a whole did not trust it as the most reliable rate benchmark, if the news media did not cite it as the gospel, or if it really was. , It’s not that bad. It plays a regulatory role in deciding to test high-cost mortgages, or …

To make matters worse, this survey includes interest rates and “points” values ​​that refer to initial costs (or what consumers may know as “discount points”). The actual definition of a “point” may seem a bit too open to interpretation at some sources, but a point (intended to be a pun) is to represent a rate that actually exists: two, initial cost and cost. Over time in different parts.

All charges have a prepaid fee, regardless of whether you can see it. Most borrowers have the option of paying higher upfront costs in exchange for lower rates. Well-meaning discount points are the initial costs that actually affect interest rates. The problem with including points in interest rate surveys is that no one pays as much attention as the headline interest rate. This is especially problematic when bond market volatility changes the normal relationship between points and rates. For example, a single discount point historically corresponds to about 0.25% at a rate. However, in mid-2022, there are multiple scenarios that correspond to rates with points above 0.50%.

What does this “point” business mean when it comes to mortgage interest rate headings?

Not so many words, Freddie’s interest rate survey means that if the “no points” interest rate is close to 5.8%, 0.8 points can show a fixed 30-year interest rate of 5.3%. And while this isn’t happening right now, it also means that major changes in lender rate quote behavior can appear to be less moving, if at all.

For example, if a lender quotes 5.625% at 0.4 points in one week and 5.625% at 0.9 points in the next week, the press says: Mortgage rates If the apple-to-apple comparison looks like 5.875% at the original 0.4 points, there is no change.

What is the conclusion here?

Thankfully, “points” aren’t a big deal this time, but Freddie’s rate index is generally better than the MND index (which weaves the cost of points into the rate itself, so it provides a constant apple-to-apple comparison). Also looks much lower. ).

The big problem is “Monday vs Monday, but reported on Thursday”. The reasons are as follows:

Super Duper Revenue: Prices have fallen absolutely between June 27/28 and this Monday, but have risen relatively rapidly since then.As of Thursday, the price is high Than last thursday Much higher Than the beginning of the week.

As always, we publish a continuously updated chart of MND rates and Freddie and MBA rates at the following link: https://www.mortgagenewsdaily.com/mortgage-rates/30-year-fixed

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