The Mortgage Index Rate

Several organizations compile data and publish mortgage indexes, based on average rates offered by financial institutions either in a specific region or nationwide. A lender’s mortgage rate may actually fluctuate from day to day, but usually only by a small fraction of a percent. An index rate tracks average rates on a daily basis and makes them available to lenders, economists and consumers.

While the index rates published by financial institutions, brokerages and others are useful and accurate, and often very useful in determining the average current mortgage rate for a particular region; the largest index rate is compiled by the Federal Housing Finance Board (FHFB).

This index, which is published monthly, compiles information on interest rates, loan terms and house prices, organizing this data by property type, loan type, and lender type. It also compiles information about 15- and 30-year fixed rate loans. The FHFB index also has a quarterly index it publishes that shows trends occurring in major metropolitan areas, well as, within districts where Federal Home Loan (FHL) Banks are located.

The FHFB also keeps annual data for historical purposes, which makes it easy to go back several years and spot historical trends. This information is also used to determine how much money a conforming lending institution can offer in a mortgage.

Fannie Mae and Freddie Mac, the predominant players in the secondary market, use the data from the FHFB index to determine a dollar limit on loans they purchase from lenders. Lenders typically comply with Fannie Mae and Freddie Mac guidelines, so they will be able to sell their mortgages in the secondary market.

The current index rate is a useful guideline when you are shopping for a mortgage, and assuming a good credit record, you should expect to be offered a mortgage with interest at approximately the rate published in the current index.