Shopping Mortgage Rates Can Save Borrowers $80K

With home prices stubbornly high and interest rates still elevated, today’s homebuyers face a daunting market. But a new analysis from LendingTree suggests this strategy: shop rates.

According to LendingTree data from its online loan marketplace, borrowers can save an average of $80,024 over the life of a 30-year fixed-rate mortgage simply by choosing the best available offer. That translates to about $222 a month, or $2,667 a year.

“That’s money that can instead be used toward other financial goals,” stated Matt Schulz, LendingTree’s chief consumer finance analyst. “It’s a big deal.”

The latest analysis marks an increase from a similar analysis last year, when shopping around yielded average lifetime savings of $76,410 — meaning potential savings have grown by more than $3,600.

Where the Biggest Savings Are

As you’d expect, homebuyers in more expensive housing states stand to benefit the most from comparing mortgage offers. The top states for average potential mortgage savings are:

• California: $118,393
• Washington: $109,012
• Hawaii: $105,473

“The bigger the price of the home, the bigger the savings for shopping around for a lower rate,” Schulz noted. 

Even in states with lower home prices, rate shopping can still pay. In Louisiana — the state with the smallest savings — borrowers can save an average of roughly $44,000 and cut monthly payments by $124.

Why It Pays To Shop

The key driver of these savings, according to LendingTree, is wide variation in interest rates offered to borrowers. Nationally, the average gap between the lowest and highest loan annual percentage rates (APRs) is 0.99 percentage points — a significant spread that can add up to tens of thousands of dollars over time.

In 20 states, that spread exceeds 1.00 percentage point. Minnesota has the widest average gap (1.15 points), followed closely by South Dakota (1.14 points).

Schulz underscored that stronger credit profiles help borrowers secure the lowest possible rates. But even for borrowers with good credit, not all lenders offer the same terms.

Put another way, for every $100,000 borrowed, shopping around could save more than $24,000 over 30 years, LendingTree’s analysis found. 

Buyers are often looking for competing offers, though not very far, and mortgage rates are certainly top-of-mind. The most recent Mortgage Monitor webinar from Intercontinental Exchange, Inc. (ICE) found:

• Two out of three borrowers say they would reuse their last lender, yet less than 25% are actually retained, signaling a potential opportunity for lenders.
• More than seven out of 10 — 72% — of borrowers cite interest rate as their top priority, and only 25% say they care about having an existing relationship with a lender.
• Most borrowers only consider one or two lenders, so being fast and competitive is a must.