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$26,404 in Savings Possible for Homebuyers Shopping Around for a Mortgage

LendingTree shows borrowers how to fight rising rates by getting competing offers from lenders.

  • Homebuyers could have seen median lifetime savings of $26,404 in interest on a $300,000 loan by comparison shopping for the best mortgage rates last week.
  • The Mortgage Rate Competition Index measures the median spread between the highest and lowest APRs available on the LendingTree platform.

June 26, 2018 — Charlotte, N.C.

We calculate the Mortgage Rate Competition Index weekly as the median spread between the lowest and highest APRs offered by lenders in our marketplace. By calculating this spread, we hope to show consumers how much they stand to save by comparing rates during the lending shopping process.

Purchase loans

  • Across all purchase loan applications on LendingTree for the week ending June 24, 2018, the index was 0.57, down 0.01 from the previous week.
  • How big of a deal is it to get a mortgage rate that’s 0.57% lower than the competition? Over 30 years, that could translate to $26,404 in savings on a $300,000 loan (see Mortgage Savings Tracker graphic below).

Refinances

  • The index was wider than the purchase market in the refinance market at 0.65, down 0.02 from the prior week.
  • Using the same assumptions in the previous example, borrowers shopping for refi loans could have saved $30,425 by shopping for the lowest rate.

Other findings

  • Average savings in 2018 are outpacing 2017 savings, up to $28,000 from $21,000 for purchase mortgages. Refinance loan savings are up to $31,000 from $26,000.
  • The Mortgage Rate Competition has widened as rates increased, reflecting how mortgage lenders have unique business circumstances that impact how they change the rates at which they can offer consumers loans.

Mortgage Savings Tracker

LendingTree Mortgage Savings Tracker

Mortgage Rate Competition Index

LendingTree Mortgage Rate Competition Index

Big week for housing data

Data already released showed strong demand for new homes with the three-month average of sales rising to the highest since the financial crisis. Prices have softened though and may be indicating that rate rises are having an impact on transaction prices. Other data this week will add to the price picture, with the release of the Case-Shiller indices. That data lags by two months, however, so the new home sales price data could be a leading sign of coming price softness.

Other data this week will give a broad read on the economy including consumer confidence, durable goods orders and personal income and spending. The star of the show could be Wednesday’s trade data, which will be closely parsed for any signs of changes in trade flows given increasingly heated rhetoric from the Trump administration and responses from China and the EU, though this data will reflect May activity. Rates have consolidated below 3% for the 10-year Treasury in June and concerns around the impact of the trade disputes will likely keep them pegged under 3%.

Low inventories pushing prices higher is the theme of this year’s housing market. Supply problems are particularly acute for lower priced homes. Sales for homes under $100,000 were down 18% Y/Y in May and those between $100,000 and $250,000 were down 7% Y/Y. Rising rates have yet to temper demand, which is supported by a robust labor market, thus buyers should do all they can to position themselves competitively. Getting financing in place ahead of the house hunt is crucial, and we strongly advise buyers compare multiple loan offers first.

About the Mortgage Rate Competition Index

The LendingTree Mortgage Rate Competition Index is a new proprietary measure of the dispersion in mortgage pricing. It measures the spread in the APR of the best offers available on LendingTree relative to the least competitive (i.e. the highest) rates. Our research shows that mortgage rate competition varies with the financial and operational measures of activity in the mortgage markets. More details on the index are available in a white paper on LendingTree’s website.

How the index is formulated

A mortgage shopper enters their information on LendingTree.com. They input loan variables, including the proposed amount and down payment, and property variables, including property type and location. Using our proprietary algorithm, LendingTree matches borrowers with lenders based on the criteria they provided. Interested lenders return a rate and fee offer. For our index, we combine the rate and fees into an APR and calculate the spread as follows:

Offers APR
Lender 1 4.21
Lender 2 4.33
Lender 3 4.40
Lender 4 4.55
Lender 5 4.62

The spread is the difference between the highest and lowest offers, in this example, 4.62-4.21 = 0.41. We repeat this calculation across 30-year loans that week and then find the median of the individual spread, which is our index value for that week. This is done separately for the population of purchase and refinance loan requests.

Download The LendingTree Mortgage Rate Competition Index White Paper

 

Today's Mortgage Rates

  • 2.869%
  • 2.53%
  • 3.033%
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