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LendingTree Reveals Where Homebuyers See the Most Mortgage Lender Competition

New LendingTree study shows how competitive mortgage markets are by metro area.

Mortgage rates are rising, recently reaching the highest levels in seven years. One of the most effective ways borrowers can adjust to rising rates is by shopping around to get their best APR. LendingTree tracks the savings available each week in our Mortgage Rate Competition Index, and thus far, consumers who have shopped for their best rates in 2018 have averaged a savings of $28,000 for a $300,000 loan, almost 10% of the loan amount.

How are borrowers able to realize these savings? The mortgage market is not monolithic — it varies across the country. Lenders are active in different regions at different intensities. This means that some areas have more lenders than others, and, as a result, more opportunities for borrowers to save by shopping.

The Home Mortgage Disclosure Act (HMDA) requires lenders to report their activities every year. From this HMDA data, which represents over 7.3 million mortgages originated in 2017, we can evaluate how competitive markets are by looking at their market share distribution.

One way to do this is to use the Herfindahl-Hirschman Index (HHI), which uses a formula to calculate how competitive a market is. HHI is a well-respected measure; for example, the Department of Justice uses it in evaluating mergers for antitrust violations to ensure a merger is not reducing competition to an extent that would harm consumers. We won’t get into the technical details of the calculation, but it creates a score that ranges from close to zero to 10,000, with a lower number indicating less market concentration and thus greater competition among lenders, which could mean more opportunities for consumers to find lower rates by shopping around.

Our data below ranks the top 50 metro areas by HHI, based on the recently released HMDA data for 2017. We also include the market share of the top 10 lenders in the metro area for an alternative measure of market concentration. We show rankings for conventional, FHA and VA loans.

Key findings

  • All metro areas show a healthy level of competition, with the highest HHI at 521 across the three loan types. The Department of Justice considers a market moderately concentrated when the HHI is above 1,500.
  • Some of the more expensive real estate markets have the least competition among lenders for conventional loans. San Jose, San Francisco and New York are all in the bottom 10 of the ranking. Market share for the top 10 lenders is close to or above 50% in these cities.
  • The most competitive markets were Providence, R.I., Boston and Hartford, Conn., with top 10 market share under 40%.
  • Markets that are less competitive for conventional loans are more competitive for FHA loans. San Jose, San Francisco and New York are examples again. This could indicate that lenders are unable to compete in the conventional market concentrate on FHA loans in these cities.
  • FHA markets are on average more competitive than conventional, but VA markets are less competitive than conventional.
  • The competition in mortgage markets means there are opportunities for borrowers to save by shopping around.

Metro areas with the most competition for conventional mortgage borrowers

#1 Providence, R.I.
HHI: 161
Market share of top 10 lenders: 34%

#2 Boston
HHI: 171
Market share of top 10 lenders: 35%

#3 Hartford, Conn.
HHI: 173
Market share of top 10 lenders: 37%

 

Metro areas with the least competition for conventional mortgage borrowers

#50 San Jose, Calif.
HHI: 521
Market share of top 10 lenders: 50%

#49 San Francisco
HHI: 512
Market share of top 10 lenders: 55%

#48 Buffalo, N.Y.
HHI: 380
Market share of top 10 lenders: 54%

Conventional Mortgage Market Concentration

FHA Mortgage Market Concentration

VA Mortgage Market Concentration

 

Today's Mortgage Rates

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  • 2.465%
  • 2.934%
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