Freddie Mac Weekly Rate Report Lagging Reality; Rates are Actually Higher Today
The venerable Freddie Mac Primary Mortgage Market Survey (PMMS™) is a cornerstone of mortgage rate data. It is both longstanding and highly accurate in capturing week-over-week movement. The only problem is that it is unavoidably backward-looking due to its methodology. There's no scandal here and Freddie does a good job of convey that methodology, saying
"The survey is collected from Monday through Wednesday and the results are released on Thursdays at 10 a.m. ET. Survey reminder emails are sent out on Mondays and lenders are asked to respond by close of business Wednesday. If we have received no response on Tuesday, we follow-up with a reminder email on Wednesday morning."
There's no harm in this if one of two conditions are met. Either rates need to be flat enough so that there's a minimal discrepancy between Thursday morning's rates and Freddie's (which will be most similar to Monday or Tuesday's rates) or mortgage rate watchers must be familiar enough with the methodology that they know it's backward-looking. The latter isn't going to happen on a broad scale and the former is hit and miss.
This week is a miss.
The very best rates of the week (close to the best in more than 3 months!) were seen on Monday. There would be no issues with today's PMMS had it not been for the abrupt increase in rates over the past 2 days. As it happens, the 0.09% drop reported is more like a 0.14% increase. This is based on the average of actual lender rate sheets (not quotes that lenders subjectively report to Freddie) from last Thursday morning to this morning.
Mortgage News Daily's "daily mortgage rate" is updated every day and adjusted for changes in closing costs that aren't necessarily large enough to prompt a change in the actual "note rate." These typically move in .125% increments and rates typically don't move that much in a day--many times even in a week!
This week they did. Last Thursday morning, we calculated an adjusted "Best-Execution" rate of 4.35%, meaning that most borrowers would be quoted 4.375% with minimal closing costs and that some would be seeing 4.25%. Apart from this Monday, that's the closest we've been to 4.25% since February 10th.
Today's calculated rate is all the way up to 4.49%! It's still early in the day for a final calculation as lenders may undergo price changes in the middle of the day, but as of right now, the true difference in cost--expressed in terms of interest rate--is indeed 0.14%. That means that most borrowers will be at least .125% higher in actual note rate (i.e. a quote of 4.375% last Thursday is likely going to be 4.5% with minimal differences in closing costs. 4.25% would be 4.375%).
Again, Freddie's rate data isn't wrong. It's actually quite good, but simply too old to be relevant for TODAY's examination of rates. Because it's so widely circulated, it's important for consumers to understand that their quoted rate won't actually be lower today compared to the last time Freddie's report was republished in every major financial news outlet. Thursday vs Thursday, rates are higher.
Here's a historical look at Freddie's rates along with MBA's weekly rate survey--both updated weekly--and Mortgage News Daily's proprietary daily rate. As you can see, there is a lot of variation day-to-day that the other two don't capture (particularly painful in June 2013!). That can be a good thing if you'd rather not be confronted with volatility or rising rates, but lest consumers across the country raise their voices with their Loan Officers saying "what do you mean rates are higher!? Freddie says they're lower!" We figured you'd choose reality over ignorant bliss.
This chart can be accessed and adjusted HERE.
MND's "Daily Rate Update" provides the most accurate account of factors affecting mortgage rate movement every day.
MND's Daily Rate Survey is updated every afternoon based on actual lender rate sheets and a proprietary survey process to most accurately capture the changes in actual rate quotes consumers encounter in the marketplace.