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Competition among lenders was worth $26,000 to borrowers last week

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LendingTree shows borrowers how to fight rising rates as the spring selling market heats up.

  • Homebuyers could have seen median savings of $26,166 by comparison shopping for the best mortgage rates last week, up 26% from a year ago.
  • This week’s Mortgage Rate Competition Index was 0.56 for purchase mortgages, up 0.11 from a year ago, and down 0.04 from last week. The Index measures the median spread between the highest and lowest APR available on the LendingTree platform.

March 27, 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 March 25, 2018, the index was 0.56, down 0.04 from the previous week.
  • How big of a deal is it to nab a mortgage rate that’s 0.56% lower than the competition? Over 30 years, that could translate to $26,166 in savings on a $300,000 loan (see Mortgage Savings Tracker graphic below).

Refinances

  • The index was wider in the refinance market at 0.59, down from 0.64 the prior week.
  • Borrowers shopping for refi loans could have saved $27,311 by shopping for the lowest rate.

Other findings

  • Average savings in 2018 are outpacing 2017 savings, up to $27,000 from $21,000 for purchase mortgages. Refinance loan savings are up to $29,000 from $26,000.
  • The Mortgage Rate Competition has widened as rates increase, 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

Mortgage Rate Competition Index

Lenders could test pricing strategies this week

The Fed meeting was overshadowed in last week’s economic news by the announcement of trade tariffs and fears of a trade war. For interest rates, however, the Fed was the significant event and results from the meeting were largely within expectations. This contributed to the narrowing of the Mortgage Rate Competition Index as rates changed little over the week.

This week will be light on economic data and markets will be closed on Friday. This suggests there will be little change in the level of mortgage rates in the market. Thus, lenders may view this as a good week to test new pricing strategies ahead of the pickup in spring sales that starts in April. As a result, borrowers will still face a market with many opportunities to save by comparing offers from different lenders. By showing the spread between high and low rates, LendingTree aims to help borrowers stay informed of the potential savings in real time.

What is 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 is the index formulated?

A mortgage shopper enters their information on LendingTree.com. They input loan variables including the proposed amount and down payment, property variables including property type and location and personal information including income. LendingTree transmits this data, including a soft credit inquiry, to lenders who evaluate the borrower against their lending parameters in their pricing engines. 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-yr 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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