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.
- Their weekly average, published every Thursday, takes into account rates that were offered Thursday–Wednesday.
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.