When interest rates move in global capital markets, so do mortgage rates nationwide — instantly. That’s real time as in no down time, lag time, lead time, rag time, tea time, or tee time. Right now!
When rates rise during any business day, within minutes every mortgage lender begins to receive e-mails screeching “REPRICING!!,” usually shutting down the ability to lock a client’s rate until new prices are posted. These mails sometimes have little sad faces drawn on them, which make an already over-stressed mortgage lender turn homicidal. When rates fall, the same process operates in reverse, but the notifications are a tad slower, prices often high-side sticky until the next day.
Electronic money moves at the speed of light, and so does the price of money. This real-time condition often causes confusion and bad feeling among borrowers and lenders, and always complicates borrower desires to shop among lenders and to compare against survey benchmarks.
If you are a sophisticated shopper, you will soon figure out that newspaper lists of rates from different lenders are approximations at best, delayed at least one day’s publication. These traditional ads have been overtaken by the web, and surfing lenders is today’s typical consumer process.
Internet postings are theoretically real time (electrons, after all), but many are slow to update. Worse, because surfers are most sensitive to rates, web postings – just like the old newspaper ads – often degenerate into a fibbing contest. Most modern mortgages are commodities, from paperwork to underwriting standards, but there are vast differences between lender skills, quality, honesty, experience, and services. Counseling by a good lender may save you more money than the gap between the highest quote and the lowest.
Even in 2010, web rates are mostly virtual time, not real time. No rate is firm until locked (and often not until underwritten and approved, including the appraisal). “That was this morning’s price; this is afternoon.” “The piggyback 2nd isn’t going to work; we’re going to have to switch to 90% with mortgage insurance and the rate will go up .25%.”
If actual, real-time, lender-to-lender comparison is more trouble than it’s worth, what about survey benchmarks?
The real estate industry is the nation’s largest single business, and the mortgage business is its finance component. You would think that somebody would post every day a real-time, honest pricing survey.
The national news media rely on survey sources, but their perpetual inaccuracy is a matter of black humor in the industry. Freddie Mac (the Federal Home Loan Mortgage Corp.) is the most widely quoted, and awful. Freddie releases its survey finding on Thursdays, but conducts the survey Monday to Wednesday each week. Its announcement on Thursday is a bulletin from Jurassic Park.
Every lender hears from survey-lagged clients: “Young man, you are lying to me. Katie Couric just told me that mortgage rates are 5.75% today!”
Another Freddie defect (plaguing all surveys): its weekly “rate” is based on an antique assumption, that everybody still pays an origination fee, and the amount of the fee is variable from week-to-week. Thus Freddie always understates the no-point-no-origination rate preferred by most consumers – and the media never reveal the weekly-changing fee.
Imagine if the national media reported the Dow Jones Average three days late, and got it wrong every time.
Better than Freddie, much closer to real time, is HSH Associates, Butler, NJ, quoted often in the media. HSH is trying hard, but Keith Gumbinger, HSH’s publisher and a good guy, from time to time posts a composite rate, a mixture of Jumbo and Fannie conforming – always lower than the former, and higher than the latter. And, like so many web pages – everybody has to make a buck – the HSH home page has degenerated into a clutter of advertising designed to capture the clicker.
No libel intended… other national news sources allege accuracy and currency, but are just wrong, day after day. The recent champion in that class has been Bank Rate Monitor. As real lenders see and hear their daily description of rates on CNBC and the like, you can hear our soft chorus of “Huh?” in the background.
The era of the web is confounding. Many, many people read Wikipedia with more caution than financial postings. The best way to stay current with day-to-day changes in mortgage rates, even intra-day: watch the 10-year T-note. The gap between the 10-year and mortgages (Treasurys lower by about 1.70% in normal, non-crisis times) changes from time to time, but mortgages will tend to follow any big change in the 10-year. Entirely free of entrapment by click, or fibbing, Bloomberg.com, Online.WSJ.com, and many others stream the 10-year yield.
Still determined to shop widely for a rate, apparent price more important to you than anything else? Pick a few well-recommended local lenders, and then call ‘em all within a 15-minute span on a stable bond market afternoon.