In laymen’s terms, tracking error basically looks at the volatility in the difference of performance between the fund and its index. Tracking error is the annualized standard deviation of daily return differences between the total return performance of the fund and the total return performance of its underlying index. Math geeks measure variability through standard deviation. Tracking error is about variability rather than performance. Tracking error is a related but distinct metric. ETF returns don’t always trail their index though tracking difference can be small or large, positive or negative. That’s because a number of factors prevent the ETF from perfectly mimicking its index. Tracking difference is rarely nil: The ETF usually trails its index. Tracking difference is the discrepancy between ETF performance and index performance. The vast majority of ETFs aim to track an index-which means that ETFs try to deliver the same returns as a particular index. As such, it’s one of the most important ETF statistics to consider. The simplest answer is “tracking difference.” Tracking difference is investors’ metric for assessing whether they’re getting what they pay for. 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.Some might turn to last year’s performance, but performance isn’t the answer-markets go up and down regardless of how well an ETF does its job. In other words, what the rest of the mortgage world refers to as "points" are built in to our index.ĭue 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. 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 some situations, rates may connote "points" upfront, but our index adjusts accordingly and only uses a constant static assumption for lender-related closing costs. Again, it is an attempt to capture the most prevalently quoted top tier rate. On that note, the "rate itself" should not be relied upon for any specific purpose. When this happens, we attempt to interpolate the index such that the MOVEMENT takes precedence over the rate itself. 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. 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. In most cases, consumers have the choice to pay more upfront in exchange for lower rates. 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. For instance, 5.125% could be roughly equivalent to 5.25% as far as the lender is concerned (this is rare, but it happens). 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, if the index is at 4.07, the predominant top tier rates would be 4.00% and 4.125%. Actual rates tend to be offered in 0.125% increments. 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. Other lenders can be "out of the market" at times. Some lenders advertise much lower rates than others. As such, the best use of any timely, accurate rate index is to observe the day-to-day change. Rate quotes can also vary massively based on the details of your specific scenario. Rate offerings vary-sometimes substantially-from lender to lender. The one and only goal is to capture the real movement in mortgage rates as quickly and as accurately as possible. Lastly, it is highly objective as we are not quoting a rate nor attempting to influence any audience for any purpose.
#Index account tracker update#
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. Unlike surveys, our index is driven by real-time changes in actual lender rate sheets. The MND Rate Index has become the industry standard for tracking day-to-day movement in mortgage rates. Our Rate Index is update each weekday afternoon (excluding market holidays). Mortgage Backed Bonds and Securitization.
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