In today's high paced informational society, individuals and companies rely on their marketing presence. One of the top three ways to market themselves or a certain message and/or product is through the internet, newspaper ads, and the radio. With this said, how much information is misleading to the general consumer?
With over 15 years in the mortgage industry, I have seen my share of false or misleading advertising. Lenn Harley wrote an excellent eye awaking article on interest rates that are advertised as "HISTORICALLY LOW" . I definitely could relate to her frustration, because I agree with her message, but I wanted to shed some light on reality.
REALITY
What one person might think is one thing, another might think differently. But when we take a term, 'historically low', and possibly make the statement, 'historically low rates', we are misleading the general public. Let's look at the definition of definition of historically from the Free Dictionary. Historical from Webster's dictionary states : based on history, or having the character of history.
As we can see, this term, Historically Low Rates, does not mean that it's been the lowest. That it has happened only once, that this is the first time. Our human intellect tells us otherwise. Just from that three word phrase, historically low rates, we can safely assume, without breaking it down, that it means the lowest ever. At least when you talk to the average consumer or many of the realtors and/or loan officers in this business.
Overall, just as the driver in the cartoon to your left thinks that he is sexy, but the police officer doesn't agree. We don't know, but the ticket could be for "misleading"?
Conclusion : How important is it that the consumer be educated on so many issues, especially the misconception of how 'historically low rates' sounds when mentioned. That was the point of Lenn Harley's post, educating the client on perception and fact.
So, what is fact in this case? If you read some of the comments in Lenn's post, you will see some graphs. What they are trying to show you is that rates, 'historically', have been low for the most part since the middle of 2002. I will agree with this for the most part, hence the true definition of 'historically low'. But, if I take a stroll back, I remember giving some clients a 30 year fixed rate at 4.875% to 5.00% with zero points. Today, the same rate with zero points would be right around 6.00%. On a $200,000 mortgage, that is a difference of about $126 per month. It might not always seem like it is, but for the average consumer, it can be a significant difference.
And in closing, Lenn brings up another great point in regards to comparing rates of the past. Not all of the rates are associated with the same costs. And some of the comments talked about perception and possibly getting the consumer to think positively and not focus on the high prices of homes, making it sound more affordable.
Overall, mortgage companies have a profitability margin that might differentiate from their competition. Here is an excellent quote from Lenn Harley, "IT DEPENDS ON WHAT YOU ARE WILLING TO PAY TO GET THAT HISTORICALLY LOW INTEREST RATE. "
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Copyright © 2007 by Jeff Belonger
Good post Jeff. While I agree with you, I also understand marketing and advertising sometimes puts things in a better light. Afterall, what is that country charmer? That creampuff? That diamond in the rough?
Happy sailing ... _/) Paul -- http://www.enewslettersolutions.com/
PAUL.... yes, marketing and advertising have their purposes. But when it comes to money and advertising within the mortgage industry, aren't we doing what we tell clients not to. Mis-manage their money? Okay, stating Historically low is not such a bad thing. But if you ever sit back and watch, the majority of lenders that advertise this are typically your bait and switch companies. Not always, but a good percentage of them. So this is were it even becomes more of an issue. I didn't want to dwell on that part of it, but just to voice my opinion and concern.
JASON.... I thought it was great... lol And yes, Lenn's post was dead on. Something that I have been complaining about for 6 years plus and I never stopped to have thought about writing about this. thanks
Jeff,
I looked at a graph today sent to me by a local mortgage company. The numbers show that rates are as low as they were in December of 2005, but I definitely would't call it "historically low". I guess loan rates are like computers, they're old news as soon as you get them. Good post. Now I have to go check out Lenn's.
I have to agree and disagree with your post and clairify on the historically low rates. With the avrage interest rate over the last 200 years being at 7.000% I do not believe the quote "Historically Low" is misleading. For a LO to quote rate with out a loan application you will have either a brand new rookie that does not know any better or a liar; as there can be as many as 18 different variables that drive an interest rate. I also read Lynn's blog and as far as a Realtor quoting rates...unless this is your profession, i strongly disagree. Great Post, surely get the mind going. Have a good one.
I have to say that when I hear the term historically low, I think long term-more than 20yrs long term. So I don't find it misleading either. I like to say relatively low or historically the rates are relatively low... can I be any more vague!
Regardless, well written...I found no misspelled words! ;)
ANDREW.... the funny thing is.... low in December of 2005 is still not the lowest rates that we have ever had in this industry. And I would bet that if you interviewed 100 people in regards to their definition of "historically low rates" and you will get many that think it means the lowest in history. Just my opinion... but just ask around... ask your peers... you may be very shocked.
DANNY..... well, what's funny, I would consider this "big word" fashion. I know what you are saying and this would be close to it... but big word fashion would be having Dennis Miller do Monday night football again... lol thanks
RONALD..... first off.... I agree and focus much in regards to realtors quoting rate... it just shouldn't happen... even should them qualifying the consumer. I don't care what they know. This industry is changing so much.
Anyhoo....Question... how come you never hear any adds when rates are 6.5% that they are historically low, if the average for 200 yrs is 7%? My main point is that some company's use this to their advantage when they don't educate the client. And I have done some studies on the companies that have advertised like this and they are the types that do the bait and switch.... have loan officers set up like a sweat shop. This makes me even cringe more so, because they are taking advantage of the market and those consumers that run to what they hear. Also... advertising costs money and those going after the quote, unquote, historically low rates will be paying more than what you and I would offer them. But again, this is just my .02.
KRISTA...... you think long term? But you still didn't answer the gist of what I am talking about. Okay, so historically low is a 20 yr period for you. Where would the rates fall into place? Meaning... are they the lowest? Average? Where do they fall in?
PHILIP...... I totally agree... this would be the correct way. But it won't sell or get people to call in. Period... and this is the part that gets me. The media makes it worse. But in my opinion, those that advertise this are the ones that usually want be giving the best deals.
Hey Jeff - love what you did with Lenn's post. And the pics were priceless. Guess I can't get too bogged down worrying about what historically low means, or what is intended. I see it as marketing and take it with a grain of salt. One thing is for sure...things will change as they always do.
Jeff
I always tell my buyers not to worry about what is advertised. The loan that you are quoted is based on YOUR own credit worthiness and experience. What they advertise only 5 to 10% of the consumers actually qualify for.
I emphasize it is all about service - Are you comfortable dealing with a major bank who will impersonally pass you from station to station on the processing assembly line, or do you want a mortgage broker / loan officer who starts the process with an in-depth consultation, educating you of your options and will have his hands on the package through the entire process.
If you are working with an ethical broker then the rates you pay are the rates you have earned. Not much anyone can do about that.
Now Have a Blessed Day,
John Occhi, Hemet REALTOR®
Mission Grove Realty