I just read an article on the new your times that claims that even though mortgage interest rates are at all time lows, the margins lenders have to work with are higher than they have been in the past.
A lot of the time lenders will give you one quote when you initially express interest in getting a loan. They hope that you won’t shop around, that you won’t compare their rate with other banks so they can make a bigger commission. But, if you do shop around, and they find out you are going to choose a different lender, then they will cut their fees and give you a better rate.
According to Lending Tree, mortgage lenders have more wiggle room to deal with when it comes to things like being able to sacrifice some potential commissions in order to compete.
According to Cameron Findlay, LendingTree’s chief economist, the difference between the rates lenders are giving consumers and what they are paying investors is much higher than it was back when the recession started, meaning that even while rates seem low, lenders have bigger margins and, therefore, have plenty of wiggle room to offer you an even better rate.
As of Monday, according to Mr. Findlay, the average mortgage rate nationally was 4.63 percent for a 30-year fixed-rate mortgage, 90 basis points higher than the 3.73 percent that investors in the loans are paid — what’s known as the coupon rate. If you account for guarantee fees, this means lenders could theoretically offer rates as low as around 4 percent, Mr. Findlay said. While the exact spread moves around quite a bit from week to week, it’s currently up from a few weeks ago. Before the summer of 2007, it was traditionally zero. Since then, decreased competition among banks has caused it to increase.
via Why Mortgage Rates Vary So Much – Bucks Blog – NYTimes.com.
