The average rate on a 30-year fixed mortgage was 7.18 percent, according to the Nov. 5 release of Freddie Mac's Primary Mortgage Market Survey. That was down from 7.24 percent the week before, the third weekly decline in a row. A year earlier, the average was 6.22 percent.

The 15-year fixed rate averaged 6.57 percent, down from 6.60 percent a week earlier. A year ago it was 5.50 percent.

"Mortgage rates continued their downward trajectory this week, improving the environment for prospective homebuyers against a backdrop of strong economic growth," said Sam Khater, Freddie Mac's chief economist.

Who the average describes

Freddie Mac says the survey focuses on "conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit."

Each part of that sentence narrows the picture. The survey borrower is buying a home, not refinancing. The loan is conventional and conforming. The borrower has 20 percent down and excellent credit.

A borrower who matches all of that is the person the average describes. A borrower who differs on any point is not.

Why an offer can differ

A lender prices the loan in front of it, not the survey borrower. A smaller down payment, a weaker credit record or a refinance is a different loan from the one in the survey. Two lenders can also quote different rates to the same person.

The average is a weekly figure. A quote is given on a particular day.

The benchmark behind it

The 10-year Treasury yield is "the benchmark for mortgages, auto loans and credit card debt," CNBC has reported. It closed at 4.863 percent on Monday, Nov. 9, according to Tradeweb data reported by Dow Jones via Morningstar.

That yield is not a mortgage rate.

What a few tenths of a point mean

Small differences in rate add up over 30 years. Here is an example. It uses standard amortization and covers principal and interest only, not taxes, insurance or fees.

On a $400,000, 30-year fixed loan:

  • At 7.18 percent, the monthly payment is $2,709.74.
  • At 7.24 percent, it is $2,725.99.
  • At 6.22 percent, it is $2,455.07.

Those three rates are the Nov. 5 average, the average a week earlier and the average a year earlier. The example shows what each rate would cost on the same loan. It does not show what any borrower was actually offered.

What to do with the number

Use the Freddie Mac average as a reference point. It tells you roughly where the market is for one kind of borrower.

Then compare offers on the same footing: the same day, the same loan amount and the same term. As the example shows, even a few hundredths of a point changes the monthly payment.

If an offer sits well above the average, ask the lender which part of the loan or the application drove the price.