People search for mortgage rates on Google. That's not news. They type in something like "California mortgage rates" and then comb through the results in search of "today's rate".
Except Google doesn't give rates. Google gives links.
Links to random websites or elaborate sieves meant to capture eyeballs and generate applications. The problem is, most people shopping for rates just want information -- they don't want to be sold something. Not yet, at least.
You can't window shop for mortgages on Google
You can't window shop Google for mortgage rates and it's frustrating. This is because searching for a mortgage isn't like searching for a book. You can't eliminate the information asymmetry inherent in mortgages; know the price before you step in the store, so to speak. You really can't know if you're getting the "guaranteed lowest rate".
In the mortgage markets, prices are elusive.
However, in doing the research, people learn a lot about mortgages.
•They learn that mortgage rates are based on mortgage-backed bonds and not the 10-year Treasury Note
•They learn how changes in the Fed Funds Rate change mortgage rates
•They learn that mortgage rates are as ever-changing as stock prices
Beyond that, though, it's an information abyss.
Freddie Mac's weekly survey is instantly out-of-date
When you're looking for mortgage rates, there's no crawler on Bloomberg; no ticker on Google Finance; no section in the newspaper. Sooner or later, therefore, everyone trips into the Freddie Mac Primary Mortgage Market Survey. It's one of the most widely-circulated mortgage rate surveys in the country.
Published since 1971, the Freddie Mac survey is the basis for national mortgage rate news, and for Home Affordability studies, and for congressional research, and about anything else mortgage-rate related. The study is flawed in a big way, however. Huge.
The problem is in the survey's methodology.
According to Freddie Mac, Primary Mortgage Market Survey results are collected Monday through Wednesday, then published to the public Thursday. By design, therefore, the survey lumps mortgage market activity spread across 3 days into 1 single point of data.
Survey results are skewed, therefore, based on the when survey responders get back to Freddie Mac.
Last week, this point was painfully clear. Mortgage rates were down Tuesday morning, but rode the rocket higher Wednesday and Thursday. It was the worst week for mortgage rates since late-December, actually. And Freddie Mac missed it -- its survey was compiled before rates went bad.
So, Freddie Mac reported 30-year fixed mortgage rates down by 0.04% from the week prior. Real mortgage pricing, however, showed rates up three-eighths.
A workaround : How to find actual mortgage rates online
What's a rate shopper to do? Well, for one, stop looking for rates on Google. Consider giving applications to a handful of Certified Mortgage Cocahes (CMC) and let them track your rates for you. A CMC can (and will) tell you about your real-time pricing if you ask.
Remember that mortgage rates change all day long. A quote issued in the morning won't be valid in the afternoon. You have to stay on your toes if you want be ahead of market changes and lock the best possible rate.
In California or anywhere else.
(Image adapted from Freddie Mac)
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John Payne is an active Certified Mortgage Coach. Reach John via email at John@JPMortgageLoans.com or call 510-799-1400 or toll free 800-259-3424.
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