Making Sense of Average Mortgage Rates

Peter Coy

It seems like a simple question: What's the national average rate these days for a fixed-rate, 30-year mortgage? But the answers are all over the lot. Here are three that you can find in a quick tour of the Internet:

5.83%
6.37%
6.44%

That's not too comforting for loan shoppers who are trying to decide whether they're getting ripped off or not. Keep reading and I'll show you where the numbers come from--and how to make sense of them.

The first, impressively low number, 5.83%, comes from the home page of Bankrate.com, which calls itself "the Web's leading aggregator of financial rate information." But if you dig deeper into the website you come across this press release, which says that the current rate is actually 6.42%, right smack between the other two averages.

What explains the discrepancy on Bankrate.com's website? I called and spoke with Greg McBride, a certified financial analyst. He said that the higher figure is based on a weekly survey of the biggest banks and thrifts in the 10 biggest metro markets. Fair enough. The low number, by contrast, is an average of the rates offered by lenders who advertise on the Bankrate.com website. Obviously, says McBride, the lenders with the lowest rates are the most likely to advertise. So 5.83% is more of a national floor than a national average.

The 6.37% number comes from the website of Freddie Mac Corp., the giant mortgage buyer. And the 6.44% number comes from HSH Associates Inc., which bills itself as the nation's largest publisher of consumer loan information.

Granted, 6.37% and 6.44% aren't all that far apart. Still, what explains the gap? Probably a difference in the average points paid. Freddie Mac says that its 6.37% rate comes with an average of 0.6 points paid, while HSH says its 6.44% rate has an average of 0.28 points paid. Other things that can affect differences in reported averages are the average commitment periods, loan-to-value ratios, and loan sizes (rates will be higher if jumbos are mixed in).

For my money, Freddie Mac is the best choice for a quick check. Its numbers are the easiest to find and to track over time.

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