Approximately 70% of U.S. home purchasers do not shop mortgage lenders looking for a lower rate, possibly costing them as much as 50 basis points in higher payments, a report from Zillow claims.
The company's analysis uses a typical home worth $360,000, with the purchaser putting 20% down. At 6.24%, the average in November for a 30-year fixed rate mortgage loan, that borrower would owe about $2,345 per month.
Nearly seven in 10 of those seeking a mortgage submit only one application, Zillow's Consumer Housing Trends Report found.
A Lendingtree study last year said
But a 50 basis point reduction is in the typical range for those who rate shop and get multiple offers, Zillow said, pointing to data from
This brings the rate down to 5.74% and the monthly payment becomes $2,253, for a savings of $92 per month or just over $1,100 per year.
Zillow claims this differential would have been enough to make 22,000 more homes affordable to a median-income household.
The results vary by market. San Jose, California had the most annual savings among the large cities listed by Zillow at $4,752. Next was San Francisco at $3,360.
But the savings would not be significant in Pittsburgh, $684 annually, nor for Oklahoma City; Memphis, Tennessee; or Cleveland, each at $744.
Meanwhile in Dallas 1,234 more homes become affordable at a 50 basis point lower mortgage rate, while the markets in Providence, Rhode Island and Buffalo, New York, only increase by 44 units. Even with the large amount of dollar savings, the market in San Jose only grows by 47 properties.
"Buyers often spend months finding the right home, but only minutes comparing lenders," said Kara Ng, senior economist at Zillow Home Loans, in a press release. "Affordability is tough enough today that buyers shouldn't overlook any potential savings."
Among the talking points of the Consumer Data Industry Association
"We believe that the U.S. Congress is best positioned to address the root cause — telephone calls — while maintaining a competitive market that allows consumers to shop for a better deal," CDIA CEO Dan Smith said in a statement following the House passage of the ban in June. "When shopping for a mortgage this can mean saving thousands of dollars and helping people afford the right home for them."
Financial literacy would likely go a long way towards creating a rate shopping culture, but it is lacking among millennials and Gen Z members, the 2025 Impact Report from nonprofit Firsthome IQ claims.
The problem is that 93% of millennials and Gen Zers did not learn financial literacy when they were attending school, the report said. But a Boston Consulting Group study from last year found that
Only 7% knew what the minimum down payment for a home was. Meanwhile, more than half claimed to be overwhelmed by the financial information they are supposed to process.
They also have a significant lack of trust with their lender and real estate salesperson. Just 20% of respondents said they relied on these professionals to help them make smart decisions when it came to purchasing a home.
"When borrowers are overwhelmed, confused, or uncertain, they delay decisions that could build wealth earlier in life," said Dave Savage, Firsthome IQ chairman, in a press release.
