Typically, every Thursday, Freddie Mac releases their weekly survey stating the national average of mortgage rates with their Primary Mortgage Market Survey (“PMMS”) press release.
Most of the news media forget to mention 4 important points:
First, on most weekly survey results, the average Interest Rates being quoted require additional fees and Origination Points. On average, the rates are quoted required about ½ to ¾ of a point extra in fees to get that rate.
Furthermore, the “average rate” presented is presented without being rounded higher the nearest 1/8th which is most likely what will be offered by a lender. (For example, if the Freddie Mac Rate listed is 3.98% – the rate a mortgage customer would receive would likely be rounded up to 4.00% because banks only offer rates in multiples of .125%)
- Second, the survey is broken down by region and the NorthEast was actually slightly higher than the national average. Depending on the property state and property location, rates and terms (including Loan size restrictions/limitations) will be different.
- Third, the survey is actually conducted over a period of one week starting from the conclusion of the previous week’s survey (Thursday) through Wednesday. This is often unreliable in that the interest rate data might be up to 6 days “old” that are being factored into the survey results and are typically vastly different at the time the survey is released.
- Finally, most if not all releases often omit important requirements or caveats that get the rates to appear very low – like specific FICO score or equity requirements.
Not all applicants can qualify for these rates. The rates are tied into specific loan-to-value and credit score benchmarks.
On average every 1/2 point (.50%) fee that a borrower pays extra to buy-down the rate will save them 1/8 (.125%) in the interest rate. [Note: A “point” represents 1% of the Loan Amount; ie $3,000 on a $300,000 mortgage].
Ever since the Government took over Fannie and Freddie, these weekly announcements by Freddie Mac are increasingly becoming public media campaigns and marketing crusades more than actually a true source of market data, insight and info that can be relied on with confidence.
What’s worse, is that many banks are not passing on the full benefit to mortgage bankers or brokers, because they are either at capital capacity and want to slow down business, or because they are building in a small “margin” to help offset their run-off of loans that they have on their books (portfolios) that they are losing to refinancing.
That said, at the end of the day — rates are definitely at historical levels!
As a participant of that survey Approved Funding knows the behind the scenes dynamic of how these numbers are procured – and the ‘devil is certainly in the details’ of those numbers.
Please contact us for specific scenarios and analysis that can help you make the best, and most timely decision about your mortgage loan.