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$26,690 in Savings Possible for Homebuyers Shopping Around for a Mortgage

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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 $26,690 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.

July 10, 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 July 8, 2018, the index was 0.58, up 0.01 from the previous week.
  • How big of a deal is it to get a mortgage rate that’s 0.58% lower than the competition? Over 30 years, that could translate to $26,690 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 0.67, up 0.02 from the previous week.
  • Using the same assumptions in the previous example, borrowers shopping for refi loans could have saved $31,098 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

The trade war is here

The monthly jobs report come out last Friday and showed that the economy continues to grow at a steady pace. Wage growth remains muted, however, suggesting that interest rates should maintain their relatively flat trend since March. Friday also saw the release of international trade data, which showed a narrowing in the trade deficit to $43.1 billion, its smallest since October 2016, and perhaps the first inkling of the impact of trade disputes.

Another event on Friday that’s crucial for the economic outlook was the latest salvo in the trade war, with the U.S. imposing tariffs on $34 billion in Chinese goods and China retaliating in equal measure. The effects of the trade war should start to filter through in data in a month or two. One of the data being released this week, Friday’s import and export prices, will be ground zero for tracking the tariffs’ effects, though this week’s release will have little to show. Next month’s release will be more closely watched. This economic indicator is about to have its 15 minutes of fame.  

Higher prices for imported components, such as lumber, will exacerbate the supply shortage in the housing market. 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

  • 2.485%
  • 2.393%
  • 2.91%
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