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Mortgage Rates Barely Budged on Wednesday; Deep Dive on Rate Index Methodology

Mortgage rates have been moving higher since late last week, ultimately hitting the highest levels in just over 2 weeks yesterday, but that trend ended today.  The average lender is almost perfectly in line with yesterday’s latest rate sheet offerings. In other words, not only did nothing interesting happen to rates today, but arguably, nothing happened at all. Looking elsewhere for something interesting to say, let’s take a moment to address a common question we receive about our daily rate index.  “What is the scenario it’s based on because my rates are higher?!” First off, our rate index is 6.70 today whereas Freddie Mac’s most recent index was 6.35 and will probably rise into the 6.4’s tomorrow.  Notably, Freddie’s methodology allows for “points” even though they are no longer captured after the most recent methodology change. That leads to the question of whether the MND rate includes points.  In not so many words, points are built in to our daily number.  We use a proprietary formula to adjust base rates for points in cases where points are likely to be used in quotes. In other words, if it makes solid financial sense to quote a rate of 6.625% with half a point upfront, our index would be higher than 6.625%.  How much higher depends on our math at the time, and the the amount can be shockingly large at times.  Reason being, there’s almost no cost different between 6.625% and 6.875% for a majority of lenders.  So quoting 6.875% makes very little sense compared to quoting 6.625% with a modest increase to upfront costs.
Source: mortgagenewsdaily.comNew feed

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