Where are Rates, Really?

Where do homebuyers get information about mortgage rates and how accurate is it? More than likely from the news media, whether in print, TV, radio or the internet. When we hear about mortgage rates from these sources they are most likely citing the weekly mortgage rate survey published by Freddie Mac each Thursday called the Primary Mortgage Market Survey (PMMS). This survey is a great tool for referencing historical mortgage rates as it goes all the way back to 1971- pretty cool and you can check it out here: http://www.freddiemac.com/pmms/

The PMMS does have a down side, though; it doesn't always keep up with what is happening with rates on a day to day basis. Since the survey data is collected on Monday and Tuesday to be published on Thursday it is often out of whack with the true level of rates. You see, mortgage rates move fluidly just like stock prices. Mortgage rates offered to applicants are a reflection of the most current trading prices of Fannie Mae, Freddie Mac, and Ginnie Mae bonds, which trade on the Chicago Mercantile Exchange (CME) most every business day of the year. So by the time the survey is published rates have already moved on. This chart shows the discrepancy between the Freddie Mac survey and actual daily rates over the past 3 months.

 

You can see that rarely do rates remain the same by the time the survey is published. In quiet market conditions the survey more closely reflects actual rates, but at other times it can be off by a mile like it was in November and December of this year. This week the survey shows rates at 4.09% when we ended the week closer to 4 1/4.