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$26,449 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 $26,449 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.

August 7, 2018 — Charlotte, N.C.

Each week, LendingTree calculates the Mortgage Rate Competition Index 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 Aug. 5, 2018, the index was 0.57, up 0.01 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 $26,449 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 0.01 from the previous week.
  • Using the same assumptions in the previous example, borrowers shopping for refi loans could have saved $30,329 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

Job growth still robust, wages disappoint

Last Friday’s job report showed a deceleration in the pace of new jobs, up just 157,000 in July and the weakest since March. Upward revisions to the prior month, adding 59,000 jobs still made for a robust report. The unemployment rate fell to 3.9% from 4.0% reflecting how tight the job market is. But the abundance of job openings and low supply of workers is still only producing modest wage gains, up 2.7% Y/Y.

The foremost data release this week will be the consumer price inflation (CPI) report on Friday. Prices are expected to have risen 2.9% Y/Y in July. With inflation faster than the wage growth reported on Friday, consumers’ real wages are declining, which creates greater demand for credit to meet spending needs. The inflation and wage numbers also support another Fed rate hike in September after passing on a hike at last week’s meeting. Higher rates on credit cards will follow, placing further pressure on consumers, and this could mean that Q2’s 4.1% GDP growth is a high watermark in the near-term.

Low inventories pushing prices higher is the theme of this year’s housing market. Supply problems are particularly acute for lower priced homes. While overall sales were down 2.2% in June, homes under $100,000 were down 18% Y/Y in June, and those between $100,000 and $250,000 were down 7% Y/Y. Rising rates and prices are only marginally tempering 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.

Want to learn more about what economic factors influence mortgage rates?

Check out this article on LendingTree.

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

  • 2.715%
  • 2.465%
  • 2.934%
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