It didn’t take long for the Federal Reserve’s 0.75% rate hike to shake the housing market.
The Fed’s move to boost the benchmark Fed Funds rate, announced on June 15, was followed by a significant rise in mortgage rates the very next day. On June 16, the benchmark 30-yard fixed-rate mortgage rose from 5.23% to 5.78%. Consider that the same rate stood at 2.93% in June, 2021.
“These higher rates are the result of a shift in expectations about inflation and the course of monetary policy,” said Sam Khater, Freddie Mac’s chief economist. “Higher mortgage rates will lead to moderation from the blistering pace of housing activity that we have experienced coming out of the pandemic, ultimately resulting in a more balanced housing market.”
How U.S. Homebuyers Can Fight Back Against Higher Rates.
On the downside, there’s really not much American homebuyers can do to stem the tide of higher mortgage rates – not when the Fed is in an inflation-fighting mood and with more interest rate hikes on the way in 2022.
The good news? Mortgage consumers can take at least one action step to save money on a home mortgage, even in a high-rate environment – shop around for the best mortgage possible.
The data backs that strategy up.
According to a new study from Lending Tree, U.S. homebuyers who shop around for the lowest mortgage rate possible can save $63,000 over the course of the entire home loan.
That calculation is based on a review of 50,000 Lending Tree users who received three or more offers from mortgage lenders in May 2022. Study analysts calculated how much borrowers in each of the nation’s 50 largest metros could save if they chose the lowest APR they were offered instead of the highest.
“With home prices and mortgage rates as high as they are, some would-be buyers may be worried that they can no longer afford a house,” said Jacob Channel, LendingTree’s senior economist and author of the report. “But, by shopping around for a mortgage, they may be able to get a lower rate than they initially thought they would, and, as a result, they may find that homeownership is a more achievable goal than it first appeared.”
The study also pegged the 10 U.S. cities where homebuyers can save the most cash by shopping around for the right mortgage, as follows, along with some additional takeaways from the study:
- San Jose, CA
- San Francisco, CA
- Los Angeles, CA
- San Diego, CA
- Seattle, WA
- Boston, MA
- Washington, D.C.
- New York, NY
- Denver, CO
- Portland, OR
— Borrowers in the nation’s 50 largest metros can save an average of $63,151 over the lifetime of their loans by shopping around for a mortgage. That breaks down to about $2,100 a year, or around $175 a month.
— San Jose, Calif., San Francisco and Los Angeles borrowers can save the most over the lifetime of their mortgages. Across these metros, borrowers can save an average of $109,185 over the lifetime of their loans. Seattle (No. 5) is the first non-California metro to appear on the list.
