It pretty much happens the same way every week. Data is released to the public as well as various news groups regarding the direction of residential mortgage rates. Where does this data come from? There are several rate surveys but the one most referred to by far is the one performed by secondary mortgage giant Freddie Mac. The mortgage rate survey results are released on Thursday of each week. It’s at that time when various news reports pick up that information and distribute various stories about mortgage markets.
This survey has been around since 1971 and is the most reliable source for mortgage rate trends. How is this national average calculated? Freddie Mac keeps a list of mortgage lenders. These selected lenders are pulled from a pool of credit unions, thrifts, retail and commercial banks and mortgage bankers. The percentage mix of each reflects the market share of each type of institution nationwide.
The survey is sent out every Monday to these institutions asking for the information to be delivered back to Freddie by the end of business day on the following Wednesday. The information is tabulated and averaged and released the next day, Thursday. The survey includes three mortgage loan products, the 30 year, 15 year fixed rate and the 5/1 adjustable rate loan. Freddie will report both the average rate along with any discount points that accompany a quoted rate.
Consumers can easily research this weekly data because it’s published on Freddie Mac’s website. For those who are actively searching for a home to buy, they can log onto this site to find national averages. However, it’s important to note that these averages are just that…averages. For those thinking about refinancing, the same information is there as for home buyers but in both instances, consumers should know these average rates are typically higher than what’s available in a competitive market. Further, Freddie just compiles this information and doesn’t issue home loans.
So, does that make Freddie’s site somewhat meaningless? Hardly. A lot of effort is put into making this weekly data available. Lenders rely on Freddie’s numbers as well as research. While lenders don’t use Freddie’s collected data to set daily mortgage rates, they can certainly see a trend. Instead, lenders follow mortgage bond rates issued by Fannie Mae and Freddie Mac. Freddie Mac also provides extensive consumer research, the indices it uses as well as mortgage market forecasts based upon the collected information.
For example, a recent post on Freddie’s site stated that in mid-June, home purchase demand activity was up by more than 20% compared to one year ago. That’s the highest rebound in more than a decade. Rates have been bouncing around historic lows as purchase activity increases which could point to a shortage of existing housing inventory in the near future, driving up home prices.
Consumers need to be careful because the weekly rate information will rarely be what’s available to the everyday consumer. Individual lenders compete for that business and one of the primary ways they do so is by offering a competitive mortgage rate. For each of the three loan programs Freddie surveys, the lender sets its rates for that day based upon the performance of the Universal Mortgage Backed Security, or UMBS as well as the selected index for adjustable rate mortgages.
The concern is when consumers see this weekly data and assume that whatever rates Freddie reports is what’s available in the open marketplace. While they may well be, they’re often higher than what I can provide, for example. For up to date rate information, it just takes a quick phone call. Something that Freddie can’t and won’t provide. Instead, call me directly and let’s set up a time to go over your situation and I can provide you with a custom quote based upon your needs.