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$29,369 in Savings Possible for Homebuyers Shopping Around for a Mortgage

LendingTree shows borrowers how to gain an edge in the housing market by getting competing offers from lenders.

  • Homebuyers could have seen median lifetime savings of $29,369 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.

Nov. 6, 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 loan shopping process.

Purchase loans

  • Across all purchase loan applications on LendingTree for the week ending Nov. 4, 2018, the index was 0.63, up four basis points from the previous week.
  • How big of a deal is it to get a mortgage rate that’s 0.63 percentage points lower than the competition? Over 30 years, that could translate to $29,369 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 0.69, up one basis point from the previous week.
  • Using the same assumptions in the previous example, borrowers shopping for refi loans could have saved $32,206 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 Index has widened as rates increased, reflecting how mortgage lenders may change the rates at which they can offer consumers loans, as a result of their unique business circumstances.

Mortgage Savings Tracker

LendingTree Mortgage Savings Tracker

Mortgage Rate Competition Index

LendingTree Mortgage Rate Competition Index

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 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 the LendingTree website. (Link below.)

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.

 

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