21Mar2014
Dan Green
Author
Dan Green
Filed Under
Mortgage Rates

Mortgage Rates Fall To 4.32%, Says Freddie Mac — But That’s Not Exactly True

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Freddie Mac : 30-year fixed rate mortgage rate falls to 4.32%

Freddie Mac reports the 30-year fixed rate averaging 4.32% nationwide, a 5-basis-point decrease from the week prior. Unfortunately, though, Freddie Mac gets it wrong.

Mortgage rates are not lower as compared to last week. Freddie Mac's survey failed to capture the aftermath of the this week's Federal Reserve meeting, in which mortgage rates spiked -- in some cases, by as much as 0.250 percentage points.

Today's mortgage rates are as high as they've been in two months.

Click to compare today's live mortgage rates.

Freddie Mac: 30-Year Fixed Rate Sinks To 4.32%

Freddie Mac's Primary Mortgage Market Market Survey (PMMS) is a weekly report which lists the average U.S. mortgage rate for three common, conventional loan products --  the 30-year fixed rate mortgage, the 15-year fixed rate mortgage, and the 5-year adjustable-rate mortgage.

Survey results are polled from 125 banks nationwide, each of which reports its "going mortgage rate" along with the number of discount points required to lock that particular rate. Discount points are a one-time fee paid at closing.

One discount point is equal to one percent of your borrowed loan size.

Freddie Mac also asks its surveyed banks to make particular mortgage loan assumptions.

The first assumption Freddie Mac asks banks to make is that the hypothetical mortgage applicant is making a home purchase with a twenty percent downpayment, and without the use of secondary financing (e.g.; HELOC, piggyback loan).

The second assumption banks are asked to make is that the mortgage applicant is a "prime borrower". That is, a borrower with excellent credit scores; with verifiable income and a low debt-to-income ratio; and, with plenty of money in the bank.

Lastly, the banks are told to assume a 30-day mortgage closing.

For this week, Freddie Mac reports prime mortgage rates as follows :

  • 30-year fixed rate mortgage : 4.32% plus an accompanying 0.6 discount points
  • 15-year fixed rate mortgage : 3.32% plus an accompanying 0.6 discount points
  • 5-year adjustable rate mortgage : 3.02% plus an accompanying 0.4 discount points

Note that the 15-year fixed rate mortgage rate is now 100 basis points lower than a comparable 30-year fixed rate mortgage. This marks the second-largest mortgage rate spread in history between the two loan types.

Mortgage applicants using a 15-year fixed mortgage will pay nearly 70% less mortgage interest over the life over their loan.

Click here to compare today's live mortgage rates.

Freddie Mac Understates This Week's Rates

Freddie Mac reported that mortgage rates fell 0.05 percentage points this week. Borrowers on the street, however, are experiencing a different reality. Today's U.S. rates are not lower as compared to last week -- rates are much higher.

And, that Freddie Mac got it wrong is really not its fault.

Each Monday, the group starts its poll, sending surveys to banks across the country. Banks are asked to reply no later than Wednesday afternoon so Freddie Mac has ample time to compile the results and release its Primary Mortgage Market Survey (PMMS) on Thursday at 10:00 AM ET.

According to Freddie Mac, though, most banks return their surveys prior to noon on Tuesday. This leaves two calendar days between the "end" of the survey and the survey's publication date.

During most weeks, those two days don't matter. This week, however, it did.

On Wednesday, the Federal Open Market Committee issued a market-spooking press statement after adjourning from its second meeting of the year. The statement re-couched the Fed's dependencies for raising the Fed Funds Rate; and included language which some considered aggressive.

Despite Federal Reserve Chairwoman Janet Yellen's insistence that the central banker's outlook for the future was unchanged, the FOMC press statement sparked a massive mortgage-bond sell-off which took rates higher by as much as 0.250 percentage points on some products.

Freddie Mac's reported rate of 4.32% with 0.6 discount points is not available today.

Is It Time To Lock A Mortgage Rate?

This week's mortgage rates rose to the highest point since January. However, 30-year fixed rate mortgages are still available under 4.50% and 15-year mortgage rates are even cheaper.

Compare today's mortgage rates and see what kind of money you can save. Rates are available online at no cost and with no obligation; and no social security number is required to get started.

Click here for today's live rates.

About the Author

Dan Green is a mortgage market expert, providing over 10 years of direct-to-consumer advice. NMLS #1019791. You can also connect with Dan on Twitter and on Google+.

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