That Benchmark Mortgage Rate Typically Isn’t Offered

Last week’s news that mortgage rates topped 6% might have come as quite a surprise for many buyers, but not because the rate was so high.

On the contrary, house hunters have been encountering mortgage rates above 6% as far back as June. They might wonder why that’s only now reflected in the widely reported benchmark national average, which comes from a weekly survey from

Freddie Mac,

the government-sponsored mortgage-loan giant.

The reason is that the way such numbers are collected makes them harder to rely on when the mortgage and housing markets shift abruptly, threatening unpleasant surprises to consumers who take them at face value.

“If you have a really volatile rate—and mortgage-rate volatility is historically high right now—by the time the survey comes out it can be grossly inaccurate,” said

Todd Hanley,

a Boca Raton, Fla.-based loan partner at CrossCountry Mortgage LLC.

As their single largest monthly expense, the mortgage rate is something of an obsession for many homeowners, the topic of dinner-party gossip and fraught conversations with family members. It is also the main reason to care about the Federal Reserve’s interest-rate decisions.

This gives the Freddie Mac index disproportionate weight, and for Mr. Hanley this year, a headache. That’s because the index frequently reports a lower mortgage rate than what’s actually available in the market, frustrating customers.

It’s a reminder of how different the real-estate market is from the stock market. You can log into a brokerage account and buy blue-chip stocks in a matter of seconds, usually at or close to widely quoted, regularly updated prices.

Housing, by contrast, is slow. A month can elapse from the time a buyer’s offer is accepted and their mortgage rate is locked in. While brokers generally all quote close to the same price for a stock, mortgage rates differ between originators based on the size of the down payment, the credit score of the borrower, that originator’s own business and dozens of other factors.

When Freddie Mac began its survey in the spring of 1971, the mortgage market was a sleepier place. Throughout 1972, for example, the 30-year mortgage rate held between 7.23% and 7.46%. Freddie Mac’s longstanding methodology has been to survey lenders on Monday, Tuesday and Wednesday and report the average rate on Thursday, which works just fine in a calm market.

But this year, the market has gone haywire, as the Federal Reserve has raised interest rates to fight soaring inflation and markets have gyrated in anticipation of its next move. As a result, a rate reported to the survey on Monday can be obsolete by Thursday. Many industry professionals like Mr. Hanley prefer to check rates from Mortgage News Daily, an industry data provider, which publishes a daily mortgage rate every afternoon, based on data collected from lenders’ rate sheets.

Economists have long said that renting and investing in the stock market is a better investment than owning a house, and in 2022 that could be especially true. WSJ’s Dion Rabouin explains. Photo illustration: Elizabeth Smelov


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On Thursday, Feb. 10, Freddie Mac reported an average mortgage rate of 3.69%. That same morning, however, the government reported an unexpectedly high inflation rate. That afternoon MND reported the mortgage rate surged that day to 4.02%. (Freddie Mac’s Index didn’t cross 4% until March 17.)

On June 9, Freddie reported a mortgage rate of 5.23%. The next day, inflation was reported to have hit a four-decade high, prompting expectations the Fed might raise interest rates 0.75 percentage point at each meeting. By Monday, mortgage rates were over 6% according to MND.

“I don’t really think it’s Freddie’s fault. I think the mortgage market was in considerable disarray,” said

Lou Barnes,

a longtime industry observer and a mortgage broker with Cherry Creek Mortgage in Boulder, Colo.

Freddie Mac’s weekly survey often lags behind the day-to-day moves of the market.

Average rate on a 30-year fixed-rate mortgage

Mortgage rates aren’t the only sort of housing data affected by lags. A widely followed national index of home prices, the S&P CoreLogic Case-Shiller index, averages results over the past three months. That means the June figure in fact covers home sales in April, May and June. Because home purchases take so long to close, some of those prices were agreed to in March, with interest rates locked in at that time.

These lags make it appear that prices are higher and mortgage rates lower than what you might actually experience if you call a mortgage broker today to try to buy a house.

Leonard Kiefer,

Freddie Mac’s deputy chief economist, acknowledged the index can quickly be out of date. But that isn’t the only reason borrowers might be seeing much higher rates than Freddie Mac’s survey.

In a typical, calmer market, different lenders tend to offer similar rates. In today’s market, it isn’t uncommon to see some lenders offering significantly higher rates than others, Mr. Kiefer said. Freddie’s average can mask a significant dispersion in actual rates, he said.

Another issue is that Freddie Mac provides two pieces of information with its data: the average mortgage rate; and fees and points. By paying more points or fees, borrowers can often secure a lower mortgage rate.

“Those fees get lost in the noise,” Mr. Barnes said.

This also isn’t Freddie’s fault. The mortgage-loan company advises users of its data that “rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.”

Freddie Mac is planning to adjust its methodology starting in November to address some of these issues. Its new series will use its own administrative loan data to get rate estimates that are closer to real time, and it will no longer publish separate fees and points people pay on mortgages, which might reduce confusion.

This week rates jumped again. Freddie Mac reported a 6.29% rate on Thursday (with 0.9 point). Still, a prospective borrower is likely to be quoted a higher interest rate (Mortgage News Daily reported a 6.62% average that day) or have to pay quite a bit in fees or points to closing costs to get that rate.

What’s a home buyer to do? In a world where rates change dramatically from day to day and from lender to lender, Mr. Kiefer of Freddie Mac advises: “There are pretty large benefits potentially to shopping around.”

Write to Josh Zumbrun at

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