Mortgage Rates Falling Are Half The Story. What About The Mortgage Fees That Go With Them?

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Each week, Freddie Mac publishes its Primary Mortgage Market Survey, a report of the nation's average mortgage rate-and-fee structure.  The media then grabs Freddie's press release and reports it to Americans in its newspapers, websites and television program.  It's through these channels that most Americans get their mortgage rate "news".

It's too bad for Americans because the press over-simplifies the survey.  Freddie Mac gives them two pieces of information -- (1) mortgage rates, and (2) mortgage fees -- but the press only reports on one of them -- rates.

Check out these headlines:

• Mortgage rates hit fresh, 37-year low (CNN Money)
• Mortgage rates fall to record low for second week (Salt Lake Tribune)
• 30-year mortgage rates hit new low (Chicago Tribune)

Factually, the headlines are accurate.  But, it's the second element of the press release that puts the headlines in context.  Sure, rates are down, but the fees lenders charge to get those rates is up.  By a lot.

According Freddie Mac's survey, mortgage rates were 0.38% cheaper at year-end versus the previous all-time low that was set in January 2008.  However, the average fees required to get that published rate lept by 0.400 percent over the same period of time. 

Let's put this in context, applying the numbers to a real-life, $300,000 conforming mortgage.

• January 2008 : $1,699 monthly payment, $1,200 loan fee
• December 2008: $1,628 monthly payment, $2,400 loan fee

A homeowner relocating to Cincinnati, for example, is saving $71 per month at today's Freddie Mac-published mortgage rates, but has to pay an extra $1,200 to do it. That makes for a 17-month "break-even" schedule -- hardly awesome.

So, we talk about this to remind you -- the headlines rarely tell the whole story.  Mortgage rates are lower, but the fees required to get them are not.  The chart above proves it.