Most Mortgage Rate Headlines Are Wrong Today
There are a lot more new stories than usual on mortgage rates today. Most of them are wrong. This one isn’t, and it’s pretty easy to see why.
Freddie Mac publishes his weekly mortgage rate survey every Thursday morning. The survey accepts responses Monday through Wednesday, but based on a comparison of overnight rates against survey numbers, it would appear Monday rates take most of the weight, Tuesday a little less, and Wednesday almost none. In other words, the survey historically compared Monday / Tue rates to Monday / Tue rates.
It is No problem if that was made clearer by the crowd of reporters who cite the survey as the final word in the rate movement from week to week. As it stands, however, we have headlines claiming unequivocally that mortgage rates are at all-time lows “right now.”
They are not … They are close overall, but most definitely is no longer at an all-time low. Come back to Tuesday morning, however, and of course! The average lender was indeed at its lowest. Things have deteriorated a bit since then and the average lender has raised their rate slightly.
Many borrowers would not see a difference on the interest rate side of the mortgage rate equation, but there is another side: upfront costs. The upfront costs associated with a given rate allow for finer tuning of mortgage interest. In other words, of course, you can still be at Tuesday’s rate, but if you pay $ 1000 more in closing costs, are you really? Spoiler alert: no, your actual APR (annual percentage rate) is now upper than it was before, even though the “note rate” on your loan is the same.
To the average reader, this point of order is relatively trivial. But for those who have outstanding loans or are considering applying, it is Very important. Put simply, if you explored rate options earlier in the week, and then saw today’s articles proclaiming “new lowest rates of all time,” just know that these headlines would need a time machine to be relevant. The rates are certainly not “high”, but they are higher than they were on Tuesday.