Find out why published mortgage rates vary

Q: We’ve been following mortgage rates very carefully but somehow the rates we see in the paper and online are rarely the rates offered by lenders. Is there a reliable place to obtain mortgage rates?

A: If you go to buy a shirt, the price is marked with a tag. You absolutely know the item’s price and so does the store. Same thing with a carton of milk or a hamburger.

We’re used to the idea of plain and simple pricing — it’s what everyone wants. We want to understand what things cost so we can decide whether or not to buy and whether one price is better than another.

And then we get to mortgages.

Mortgage prices are different. They’re constantly in motion. Consider the weekly mortgage rates announced by Freddie Mac each Thursday. These rates are long a staple of the real estate marketplace. They have been posted continuously since 1971. Freddie Mac numbers are useful because they provide a standard basis from which we can compare rates. They give us a way to measure current rates with interest levels last week, or with rates 20 years ago.

If you look at the way Freddie Mac rates are calculated you can see why lender quotes might be different. Rate survey “emails are sent out on Mondays and lenders are asked to respond by close of business Wednesday,” according to Freddie Mac.

“If we have received no response on Tuesday, we follow up with a reminder email on Wednesday morning. We receive a few responses on Monday, but most responses are returned on Tuesday with the balance received on Wednesday.”

The rates published Thursday reflect interest levels which might have been in place on Monday, Tuesday or Wednesday. They do not represent the rates in effect on Thursday. Instead, they give us a general snapshot of rates earlier in the week.

Lenders base their rates on their cost of funds. A good way to generally track mortgage trends is to look at the rates for 10-year Treasury notes. Note rates move up and down all day. There usually isn’t much daily movement, but rates do move, and in some cases they move enough to impact mortgage quotes, which are usually expressed in 1/8th of a percent.

While published mortgage rates have value, they may not be the absolute latest rates, the rates lenders provide with a Loan Estimate (LE) form. For that, you need to shop around and speak with lenders.

Email your real estate questions to peter@ ctwfeatures.com.