The 18% Success Rate Of Bankrate’s Mortgage Rate “Experts”

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Need to know where mortgage rates are headed? You may want to ignore the “experts”. They’re wrong more often that they’re right.

About The Bankrate.com Mortgage Rate Trend Index

The Mortgage Rate Trend Index is Bankrate.com’s weekly survey of top loan officers around the country. I am a regular participant since 2006.

Each week, Bankrate asks a simple question:

Will mortgage rates move up, down, or remain unchanged 7-10 days from now?

The survey results are meant to help rate shoppers decide whether to lock a mortgage rate, or to float one; to commit to a lender, or to keep shopping.

The Mortgage Rate Trend Index is among the Bankrate’s most popular pages. Plus, it’s syndicated to sites like Yahoo! Business and Fidelity Investments.  Clearly, people are using this thing for rate-locking advice.

And, it’s too bad, really, because the advice they’re getting is dead wrong.

Comparing the weekly survey to the actual path of mortgage rates 7 days forward, the Bankrate Mortgage Rate Index has been wrong in 31 of the last 38 weeks.

That’s an 82% failure rate. More than 4 out of 5.

Why Are Bankrate’s Rate Trend Index Experts Wrong?

To be fair, not everyone surveyed is wrong each week; just the group as a whole is wrong.

For example, yours truly is 19-for-38 since January 2010 — a batting average of 0.500.  And, I am sure there are other whose results are similarly strong. As a group, however, the advice we’re giving is awful.

There are two main reasons why.

First, it’s tough to predict the future. For as much information as top loan officers have at their fingertips with respect to mortgage bonds, economic data and trendlines, The Unexpected happens. Often.

And, second, you have to account for Human Nature.

Remember, loan officers are in the mortgage business every day of their lives and they tend to keep mortgage rates in historical perspective.  Never since ever have rates been as low as they are today, and to insiders like us, it’s ludicrous to see 30-year fixed rate loans pricing as they are.

We keep waiting for “normal” to return, and somewhat expect it. Despite this ongoing, 6-month rally in mortgage rates, there wasn’t a single week in which the group predicted rates to fall.

Really.

The Experts Are Wrong. So, Where Should You Turn?

When you need to lock a mortgage rate, remember that it’s a challenge for anybody to predict the future. Markets and makeup change way too fast.

Therefore, the best thing to do as a homeowner is to find a loan officer that knows why markets move, and when they’re actually moving. A good loan officer will have a 15-20 minutes head-start on bank pricing and can tell you when rates are about to rise, or fall.

A good loan officer can keep you from locking in too soon, and locking in too late, too.  Even if you save just 1/8 percent on your mortgage, the loan officer’s advice is going to be helpful to you . The key is to work with someone who tracks real-time mortgage market data and then knows what to do with it.

I post this sort of information on my Facebook page.

Dan Green is an active loan officer. Email or call 513-443-2020. Dan is on Twitter at @mortgagereports.