The inaugural report showed 2017 spreads in the refinance market were wider than those for purchase loans
LendingTree has launched its Mortgage Rate Competition Index, a new measure of the dispersion in mortgage pricing that looks at the spread in the APR of the best offers available on LendingTree relative to the least competitive.
Calculated weekly, the index looks at both purchase and refinance mortgages and uses a standard loan size of $300,000 to arrive at the lifetime savings on 30-year fixed loans.
In its inaugural report, LendingTree found that the APR spread was wider in the refinance market than the spread for purchase-loan requests. The index for the refinance market posted a 0.55 average spread between the lowest and highest APR, which translates to potential savings of $26,000 had borrowers shopped to find the lowest rate. Meanwhile, the index across all purchase loan requests was 0.46, which translates to $21,000 in additional costs on a $300,000 loan.
In the new year, the index for purchase loans widened to 0.59, which represents $27,000 of potential savings. Through the same period, the index for refinances was even higher at 0.63, representing $30,000 in potential savings.
For the week ending March 11, LendingTree found that potential savings for purchase loans was $26,780, while potential savings was $27,616 for refinances.
"The Mortgage Rate Competition Index is the widest it has been in five years," LendingTree Chief Economist Tendayi Kapfidze said. "The inaugural release comes at an important time for mortgage borrowers as interest rates have been on an upward trajectory in 2018, increasing the price of buying money on a daily, if not hourly basis. As rates change, some lenders react more than others, resulting in interest-rate variances. Borrowers have the opportunity to compare offers from different lenders, and find the best offer that fits their needs."
LendingTree also launched its Mortgage Savings Tracker, which is built on top of the Mortgage Savings Tracker. The tracker uses proprietary data to measure savings available to potential mortgage borrowers for purchase mortgages and refinancing.