Could the Refi Boom be ending? For the third straight week, mortgage rates have climbed. Freddie Mac reports the 30-year fixed rate mortgage rate higher by 3 basis points to 3.62%, on average, nationwide. The 15-year fixed rate mortgage is higher, too, climbing one basis point to 2.88%, on average.
The benchmark mortgage rates are both at 7-week highs.
30-Year Fixed Rate Rises To 3.62% Plus Points, Closing Costs
When we talk “mortgage rates”, we’re often talking Freddie Mac’s weekly Primary Mortgage Market Survey, a survey which ask of 125 banks nationwide their respective mortgage rates for the 30-year fixed rate mortgage, the 15-year fixed rate mortgage, and the 5-year adjustable rate mortgage, plus any discount points that may be required to get said rate.
Freddie Mac’s mortgage rate survey is highly-cited. It’s the one most often used by journalists, by Wall Street, and by economists. It’s also an input for other housing metrics including the Home Affordability Index, among others.
When people talk in general terms about mortgage rates, they’re citing Freddie Mac.
“Real” Rate Shoppers Don’t Get Freddie Mac Rates
To an active mortgage rate shopper, though, the Freddie Mac mortgage rate is a little less valuable. This is because it’s rare for an actual home buyer, or an actual refinancing household to get access to the “Freddie Mac” rate.
There are three reasons for this.
The first reason why mortgage rate shoppers don’t get access to Freddie Mac published rates is that the published rates are an average from all of Freddie Mac’s surveyed banks. This week’s rate is 3.62%. Conforming mortgage rates, though, are priced in 1/8ths, exclusively. There’s no such thing as a 3.62% mortgage rate, really. The closest rate would be 3.625%.
The second reason is that mortgage rates vary by region and, this week, Southeast Region borrowers are paying the most. Homeowners in Florida and Georgia, as examples, are paying higher mortgage rates and higher loan fees than homeowners in Western Region states such as Arizona and California.
The third reason is that Freddie Mac assumes that all mortgage applicants pay discount points. Few do.
Discount points are fees paid to your lender at the time of closing in exchange for a mortgage rate that’s below the “market rate”. If today’s market rate for a 30-year fixed rate mortgage is 3.75%, for example, as a mortgage applicant, you have the option of paying discount points to get a rate of 3.62% instead.
The more discount points you pay, the lower your mortgage rate.
Because Freddie Mac mortgage rates are quoted with a high number of discount points, it creates a confusing comparison whereby Freddie Mac’s rates appear undercut “competing” mortgage rate surveys.
As a comparison :
- Freddie Mac Survey : 3.62% mortgage rate + 0.60 discount points
- Mortgage Bankers Association Survey : 3.76% mortgage rate + 0.47 discount points
- Bankrate.com Survey : 3.86% mortgage rate + 0.42 discount points
These three surveys show the same mortgage rates, mostly. If you pay more points, you get lower rates.
30-Year Fixed Rate Mortgage Rate At 3.62%
This week, Freddie Mac reports that refinance applicants paid, on average, 0.6 discount points for access to 3.62% mortgage rates.
A borrower in Philadelphia, Pennsylvania, therefore, borrowing at the local conforming loan limit of $417,000, could expect a discount point charge of $2,502 to be paid at closing, in addition to the “typical” closing costs associated with a mortgage.
The same applicant borrowing at the Orange County, California jumbo loan limit of $625,500 would pay $3,753.
Like most closing costs, discount points may be “rolled in” to your loan balance or paid as cash at closing, so long as your loan size does not exceed the jumbo loan limit for your area. Discount points may also be waived in full. If you choose to waive discount points, you should expect a higher mortgage rate — something closer to 4.000%.
You may also opt for a zero-closing cost mortgage.
15-Year Fixed Rate Mortgage Rate Climbs To 2.84%
Freddie Mac’s weekly mortgage rate survey showed the following national numbers :
- 30-year fixed rate mortgage : 3.62% with 0.6 discount points
- 15-year fixed rate mortgage : 2.88% with 0.6 discount points
- 5-year adjustable rate mortgage : 2.76% with 0.6 discount points
Note that these Freddie Mac mortgage rates does not differentiate between a purchase money mortgage and a refinance one. Nor does it account for low-downpayment mortgages or loans with lender-paid mortgage insurance. Specifically, Freddie Mac surveys for “prime” mortgage borrowers. Your actual quoted mortgage rate may be higher or lower depending on the traits of your loan..