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Be Careful With New on Mortgage Rates Today

It's Thursday, which means Freddie Mac released its weekly update on mortgage rates.  This is typically not that big of a deal because mortgage rates don't tend to move enough in the short term to expose the shortfalls of Freddie's methodology.  To be perfectly fair to Freddie, their methodology is fine for those who want a once-a-week look at rates and who aren't currently in the process of shopping for a mortgage or home.

Unfortunately, much of the consumer-level interest in mortgage rate news comes from those who are in the process of shopping from a mortgage or home!  Granted, they're not seeking out Freddie's rate survey, but they do tend to come across internet news that cites Freddie's data as a source. 

Enter the pitfalls.  Freddie's survey deadline is Wednesday for any given week and most of the sample is in by Tuesday.  This means that the weekly rate survey ends up being more like a "Monday/Tuesday" rate survey.  Again, that's not usually a problem if Wed-Fri look like Mon/Tue, but this week, they don't!

Rates spiked more than normal yesterday and then repeated the feat today.  Combine that with weakness in underlying bond markets (which drive mortgage rates) that began on Tuesday afternoon, and the average lender is roughly  an eighth of a percentage point higher in rate today.  Freddie's headline of 4.04% is the stuff of dreams as far as most borrowers are concerned.  While rates near 4.0% are available in some of the best cases, the average top-tier quote is now easily 4.125% and many lenders are up to 4.25%.  If you're not putting 20% down or have less than perfect qualifications, it would be even higher.

Like yesterday, these are the highest rates in more than 9 months.  Any time we're pushing long-term highs, it's a good idea to remain defensive in terms of locking vs floating.  The saving grace is that long-term highs typically precede extended periods of positivity for rates.  It's just a matter of figuring out if these long term highs are high enough to rebalance the scales in the bond market.

This Daily Mortgage Rate Update is provided in partnership with Mortgage News Daily.