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$35,108 in Savings Possible for Refinance Borrowers From Shopping Around

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

  • Homebuyers could have seen median lifetime savings of $30,041 in interest on a $300,000 loan by comparison shopping for the best mortgage rates last week.
  • Refinance savings of $35,108 were the most since we started tracking the data in 2013.
  • The Mortgage Rate Competition Index measures the median spread between the highest and lowest APR available on the LendingTree platform.

June 5, 2018 — Charlotte, N.C.

We calculate the Mortgage Rate Competition Index weekly as the median spread between the lowest and highest APR 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 3, 2018, the index was 0.65, up 0.03 from the previous week.
  • How big of a deal is it to get a mortgage rate that’s 0.65% lower than the competition? Over 30 years, that could translate to $30,041 in savings on a $300,000 loan — 10% of the total loan amount (see Mortgage Savings Tracker graphic below).

Refinances

  • The index was wider than the purchase market in the refinance market at 0.75, up 0.06 from the prior week and the widest on record.
  • Using the same assumptions in the previous example, borrowers shopping for refi loans could have saved $35,108 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 $30,000 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

Trade talks dominate this week

Declining mortgage application volumes are supporting the competition index as lenders fight for volume. This is particularly apparent in the refinance market where the MBA Applications Index is at its lowest since December 2000.

The jobs report released on Friday was a marked improvement from the two prior months and supports the Fed’s rate hike plans. This week, trade talks will dominate the economic news cycle as President Trump heads to Canada. There is likely to be added market volatility as investors digest the news flow.  

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 13% Y/Y in April and those between $100,000 and $250,000 were down 1% 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

  • 2.362%
  • 2.337%
  • 3.08%
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