Headlines Speak to the Masses
More big headlines about mortgage rates falling to an all-time low.
Just last week, Freddie Mac published its weekly mortgage rate survey and found that the “average” mortgage rate is now 4.96 percent. This is the lowest rates have been reported since the survey started in 1971.
Looking Beyond the Headlines
However, if you look beyond the headline, you’ll find that there’s another part of the story definitely worth watching. Mortgage rates are falling but the number of points required to lock those rates is not.
Looking at the details, lenders now require an average payment of 0.7 points to get the 4.96 percent rate from the headlines. That’s up from 0.6 percent last week and 0.4 percent a year ago.
Explaining the Costs
For clarification, a “point” is a fee equal to 1 percent of the loan size.
In order to get access to a 4.96 percent interest rate on a $200,000 home loan, today’s lender would require an additional $200 versus last week and $600 versus last year. Today’s borrower would pay $1,400 closing cost in addition to the “typical” closing costs accompanying a purchase or refinance.
Looking at the Big Picture
Yes, this is a period of historically low rates — there’s no doubt about that. However, the cost of getting access to low rates is increasing. The press doesn’t always tell that part of the story and it’s one more reason to look deeper than the headlines.
Fees are getting higher at all lenders. Remember, all of the mortgage money comes from the same place.
(Photo Kudos: The Wall Street Journal)
