$27,550 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 $27,550 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.
Oct. 23, 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.
- Across all purchase loan applications on LendingTree for the week ending Oct. 21, 2018, the index was 0.59, the same as the previous week.
- How big of a deal is it to get a mortgage rate that’s 0.59 percentage points lower than the competition? Over 30 years, that could translate to $27,550 in savings on a $300,000 loan (see Mortgage Savings Tracker graphic below).
- The index was wider than the purchase market in the refinance market at 0.67, down 0.01 from the previous week.
- Using the same assumptions in the previous example, borrowers shopping for refi loans could have saved $31,195 by shopping for the lowest rate.
- 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
Mortgage Rate Competition Index
Want to learn more about what economic factors influence mortgage rates?
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. (See bottom of page.)
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:
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.