When receiving a new mortgage loan inquiry, I will often be asked “What’s the rate today?” My response is to answer that question with more questions, which I know can be frustrating. The person asking may believe I’m avoiding their question to the point of being outright evasive. But that’s not the case. Let me explain:
There is no one mortgage rate; and the rate available to a borrower is not static, but rather, dynamic. Mortgage rates, or what I prefer to call mortgage pricing, changes all the time, from daily or even during the day; what is referred to as “intraday”. In that respect, mortgage pricing is similar to the stock market and can sometimes be just as volatile. Other times mortgage pricing can be relatively stable within a fairly narrow range. Because most mortgage loans serve as collateral for bonds, what occurs in the financial markets each day will have an impact on the movement in mortgage pricing and therefore mortgage rates. Here’s a tip: to track the general direction of mortgage rates keep your eye on the 10-year treasury bond yield. While not directly correlated, the 10-year bond yield is a pretty good benchmark to use to follow the change in mortgage rates. And the bond yields will move up and down every day and during the day due to various factors such as the release of various economic statistics, commentary coming from the Federal Reserve, flow of funds between the stock and bond markets, domestic and international events, and so on. This is why the standard disclaimer from lenders is that interest rates are “subject to change daily and without notice”. And it’s for these reasons that when shopping for a mortgage and getting quotes from lenders, it’s imperative to get the quotes dated the same day so each lender is quoting based on that day’s economic conditions.
The other important thing to note with mortgage rates is that the rate available to a borrower is determined by a myriad of “risk factors” based on that borrower’s specific scenario. The price of a mortgage will be determined, either for better or worse, on many factors such as property disposition including primary home, 2nd/vacation home or rental, property type, loan to value, loan term, employment status, credit score, debt to income ratio and so on. That’s part of the reason when I’m asked “What’s the rate today?” I will ask a few questions so I can get your questions answered correctly. It has always been our philosophy to provide a prospective borrower a detailed closing cost worksheet before starting the mortgage process. Most consumers will not pursue any product or service until they know, up front, what it will cost. Obtaining a mortgage, whether to purchase or refinance a home, should be started the same way.
So, given the above, what’s with the mortgage rate grid you see on our home page? Good question. The grid serves as an indicator of where mortgage pricing is, and nothing more. We try to keep it updated so that it reflects the general mortgage pricing available when viewed, to then be fined tuned to a specific borrower’s needs once we are able to ask a few questions.
I hope the above will help shed some light on the complex world of mortgage rates, so let me end with the standard mortgage rate disclaimer:
All loans are subject to credit approval. Interest rates are subject to change daily and without notice. Current interest rates shown are indicative of market conditions and individual qualifications and will vary upon your lock-in period, loan type, credit score, purpose and loan to value.