Rate Index Methodology

Due to the proprietary methodology and the volume of correspondence we receive, we are unable to respond to questions about the rate survey. The following list attempts to answer the most common questions over the years. If your question is not addressed, you can make a suggestion for an update, but please read the whole list first.

  • Most important point: the best use of this index is to track the CHANGE from day to day. There are so many things that can cause discrepancies between borrowers, lenders, and quotes. But because we use the same baseline scenario year after year, you can be sure that the CHANGE is a good representation of how rates are moving.
  • The source data is actual rate offerings from a variety of lenders including wholesale, correspondent, and retail.
  • The index is generally updated once per day unless multiple lenders have changed rates during the day.
  • A "top tier" scenario is used as a baseline (75LTV, 760FICO, etc).
  • We use proprietary methodology to adjust the rate to account for points. That can mean that lenders are quoting 6.125 with points while our index is at 6.25, hypothetically.
  • We generally disregard the "loss leader" mentality among certain lenders (i.e. quotes of 5.5% in the marketplace have little to no effect on the index if the average lender is at 6.25%). Conversely, we also disregard lenders who are obviously out of the market on the high side.
  • Originator compensation is irrelevant to this index. It is intended to capture the average lender's top tier conforming, conventional 30yr fixed rate quote, adjusted for the prevalence of upfront points (in cases where they actually make sense). One can safely assume that the average lender rate quote is generating compensation for the originator.
  • If you are a lender and your rate is significantly higher than our index, you are either out of the market or you are not comparing apples to apples (again, that's 75 LTV / 760 FICO and no other agency LLPAs)

Our Rate Index is update each weekday afternoon (excluding market holidays).

The MND Rate Index has become the industry standard for tracking day-to-day movement in mortgage rates. Unlike surveys, our index is driven by real-time changes in actual lender rate sheets. This means we can update it any time rates change during the day and that it will be much more accurate than survey-based indices. Lastly, it is highly objective as we are not quoting a rate nor attempting to influence any audience for any purpose. The one and only goal is to capture the real movement in mortgage rates as quickly and as accurately as possible.

A Note on Methodology

Rate offerings vary—sometimes substantially—from lender to lender. Rate quotes can also vary massively based on the details of your specific scenario. As such, the best use of any timely, accurate rate index is to observe the day-to-day change.

Some lenders advertise much lower rates than others. Other lenders can be "out of the market" at times. Our index attempts to capture the most prevalently quoted conventional conforming 30yr fixed rate for a loan scenario with at least 20% down and no major loan level price adjustments.

The index is expressed as an average. Actual rates tend to be offered in 0.125% increments. For instance, if the index is at 4.07, the predominant top tier rates would be 4.00% and 4.125%.

Special Note on Market-Driven Volatility

Mortgage rates are based primarily on MBS and the structure of the MBS market can occasionally result in it being more profitable for a lender to offer a lower rate. For instance, 5.125% could be roughly equivalent to 5.25% as far as the lender is concerned (this is rare, but it happens). In this scenario, 5.0% would cost the lender more, but those costs could be passed on to the consumer in the form of higher closing costs. In most cases, consumers have the choice to pay more upfront in exchange for lower rates. Our rate index attempts to account for the likelihood and wisdom of such choices based on proprietary methodology and feedback from our community of originators. For instance, your actual rate quote could drop from 5.25% to 5.00% in a single day when the MBS and broader bond market would only suggest half as much movement. When this happens, we attempt to interpolate the index such that the MOVEMENT takes precedence over the rate itself.

On that note, the "rate itself" should not be relied upon for any specific purpose. Again, it is an attempt to capture the most prevalently quoted top tier rate. In some situations, rates may connote "points" upfront, but our index adjusts accordingly and only uses a constant static assumption for lender-related closing costs. This is far more useful because it allows us to focus on one "effective" rate as opposed to a "note rate" + "upfront costs" (aka "points"). In other words, what the rest of the mortgage world refers to as "points" are built in to our index.

A Note on Questions About the Rate Index

Due to the proprietary methodology and our position as the market leader in this space, the preceding represents the extent of information we are prepared to share regarding the index. In other words, if you have any additional questions about the index, we can't answer them and will simply direct you back to this text.


Matthew Graham