Are Rates Really Over 7%? Not Really; Rates Up 2% Since August; Survey

Last week’s average interest rate was 6.82% per (about 1/2% higher than where they were last week).

The average is up almost 2% from early August when it bottomed near 5% — amazingly.

The average rate was in fact over 7% early last week, but they plummeted again (and I will explain why below).

The lowest average rate of all time per the above chart was in the high 2.7% range in late 2021.

The average rate, however, can be very misleading for a variety of reasons.

1. No Jumbo. Jumbo rates are as much as 1% LOWER than conforming (Fannie Mae and Freddie Mac) rates, but they are not included in the survey.
2. Includes all borrowers. All borrowers are included in the surveys, including those with low credit scores, very small down payments and/or small loan amounts. And, as I remind readers often, those factors can heavily impact mortgage rates (often by over 1%!).
3. Fees. Many of the loans include fees and buydowns, which distort the survey data downwards.
4. Lag the market. The surveys also often lag the market because of the time it takes to do the surveys and compile the data. This is particularly the case when rates are moving quickly like they did over the last week. Freddie Mac’s survey is the worst when it comes to lags, but newspaper and trade press surveys are also often equally inaccurate.

Rates were going through the roof earlier last week and I saw many rate-watchers speculate that they would keep going…

But, they pulled back sharply again — in response to the Bank of England’s announcement that it would start to buy some of its longer term bonds, or start Quantitative Easing again.

In other words, a major central bank is returning to more of the same — that helped drive the inflation that central banks are ostensibly fighting (yes, you are right; it makes sense).

The 10 Year Bond Yield (which correlates closely with mortgage rates) was up over 4.0% before the Bank of England made its announcement, and it is now down to 3.75%.

Jay Voorhees

Founder of JVM Lending