Nov 3, 2023 - Economy & Business

How to interpret mortgage rates you see in headlines

Illustration of a percentage sign seen through a magnifying glass.

Illustration: Brendan Lynch/Axios

Mortgage rates hit above 8% recently, according to Mortgage News Daily, but that might not be the whole story.

Why it matters: The rates you see online are just averages. "Averages always mean there's something better and something worse," says Melissa Cohn, who's been in the business 40 years.

What's happening: Mortgage rate averages vary by source because each source uses different methodologies.

  • "These national averages give us a good sense of the direction, but they're not very good at telling us the actual rate," Cohn says.

Zoom in: Freddie Mac analyzes the mortgage rates offered to borrowers who put 20% down and have excellent credit — submitted by loan officers from various lenders.

Meanwhile, Mortgage News Daily analyzes applications across lenders daily, and adjusts rates to account for buy-downs.

  • The applications they analyze are borrowers with 760+ credit scores and 25% cash down.
  • "The result is a single rate that corresponds to the effective rate that a top-tier borrower/scenario is most likely to see on the same day it's published," Matt Graham of Mortgage News Daily tells Axios.

What they're saying: Mortgage News Daily is "more of a true average than what you get from Freddie Mac," Donny Kirby, president of Clear Point Home Loans, tells Axios.

Yes, but: Mortgage rates change constantly, and the swings are big right now. Rates have changed as much as half a point in a single day, Kirby says.

  • Kimber White is on the National Association of Mortgage Brokers. In the last three weeks he's seen some rates yo-yo from the high 6s to more than 8%.

Be smart: Rates hinge on many factors, including how much each lender wants profit from your transaction. "Every lender has a margin they're trying to make," Kirby says. And lenders pass that margin, narrow or wide, onto their customers.

Bottom line: If you're applying for a mortgage, it's fair to use 8% as your base rate, Loan Pronto founder Roger Moore says.

  • Rates will hover in this range the rest of 2023, and likely won't drop in the first half of 2024, he says.
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