Borrowers are likely to save an average of $1,500 over the life of a $250,000 loan if they compare rate quotes between lenders according to Freddie Mac’s latest Insight report for April. If they compare more than two quotes, their likelihood of saving more rises, the report indicated.
The report found that 80 percent of borrowers who obtained one additional rate quote while shopping for a mortgage could save between $966 and $2,086 over the life of their loan. If they received five rate quotes, the expected savings increased to $2,914, with 80 percent of those borrowers saving between $2,089 and $3,904.
To arrive at these numbers, Freddie Mac analyzed the present value of the rate reductions from additional searching and computed savings based on each week’s survey for the average savings, and both the bottom ten percent and the top ten percent of savings for each week and then averaged across all weeks.
Indicating that several factors influenced the expected savings to a household, the report said that first, the savings would be proportionate to the loan size. So, a larger loan would increase the savings and vice-versa. Also, borrowers who expected to have their mortgage for a longer term, and neither refinance nor move, were likely to gain more at a reduced rate. Dispersion of rate offers also affected savings as they could be higher during periods of economic stress.
“By shopping more than one mortgage lender, consumers are more likely to get a better interest rate and save money in both the short- and long-term,” said Len Kiefer, Deputy Chief Economist at Freddie Mac. “With lower monthly payments and lower fixed fees, the loan will be more affordable and thus safer, and consumers may have hundreds or thousands of dollars more in their pockets. Not a bad return for a few phone calls or clicks.”
Recently, Lending Tree also released its weekly Mortgage Rate Competition Index and Mortgage Savings Tracker that calculated the median spread between the lowest and highest APR offered by lenders in the market to showcase how much consumers stood to save by comparing rates during the process of shopping for a mortgage loan.
According to the data on these indexes, the average savings in 2018 outpaced the savings for 2017, up to $27,000 from $21,000 for purchase mortgages. For refis, savings were up to $30,000 from $26,000.