The LendingTree Mortgage Rate Competition Index is a proprietary measure of the dispersion in mortgage pricing. It measures the APR spread of the best offers available on LendingTree relative to the least competitive (i.e., the highest) rates on 30-year, fixed-rate mortgages. 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 LendingTree white paper.
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, and property variables, including property type and location. Using our proprietary algorithm, LendingTree matches borrowers with lenders based on the criteria they provide. 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:
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, fixed-rate loans and then find the median of the individual spread, which is our index value. This is done separately for the population of purchase and refinance loan requests. For the purposes of this study, we used data on the combined statistical area (CSA) or metropolitan statistical area (MSA) levels to approximate data on a city level.
LendingTree research analyst Jacob Channel contributed to this report.