Nov. 2015-Opportunity Knocks

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Th e M Rep o RT | 39 O r i g i nat i O n s e r v i c i n g a na ly t i c s s e c O n da r y m a r k e t ORIGINATION the latest survey Finds consumers do not Bargain Hunt for mortgage loans While nearly 80 percent of consumers consider themselves "bargain hunters," less than one third shop around for major financial products. a lthough the majority of Americans consider themselves bargain hunters when shopping for various items or services, less than one third of these consumers shop around for better prices when searching for a mortgage loan. A recent study from LendingTree found 79 percent of Americans consider themselves bargain hunt- ers and 92 percent research prices online before buying an item. However, consumers do not appear to be as motivated to hunt for bargains when it comes to shopping for a mortgage loan. LendingTree determined 30 per- cent of consumers seek the best prices when shopping for a major financial loan, such as a mortgage loan, while 18 percent indicated they never look for better rates or prices on loans. Consumers seem to be more willing to shop around for much smaller purchases. The survey found more than 80 percent of consumers noted they would go out of their way to save 10 cents per gallon on gas, but only 17 percent of car owners negotiated their auto interest rate. "It's an interesting phenom- enon. Consumers are generally very savvy with their shopping behavior when it comes to day- to-day purchases and material goods," said Andrea Woroch, LendingTree's consumer savings expert. "But, once it comes to a major financial investment, we see a collapse of the normally rational pattern of behavior and mentality for saving." She added, "Consumers sometimes may be too focused on price and fail to consider the lifetime cost of interest which is really where banks and lend- ers make their money. Over a five-year auto loan, or 30-year mortgage, a one percent difference between interest rates can easily translate to thousands of dollars." Woroch suggested there could be a number of causes for this "ir- rational behavior" among consum- ers including: • Many Americans don't under- stand the long-term costs associ- ated with compounding interest and the time-value of money. • Consumers are uneducated about loan shopping and the impor- tance of comparing interest rates before financing a purchase. "It's easy to become emotionally involved with the purchase itself or to find the loan process so frustrating that you would rather finalize the purchase instead of shopping around," Woroch said. "Unfortunately, consumers are becoming accustomed to paying a premium for convenience on a variety of products we purchase every day, such as bottled drinks for example. But is the conve- nience of not shopping for loans really worth thousands of dollars? Perceived convenience is a major trap consumers can fall into, but with technology improving our ability to find the best deal, saving money on your major finances is just as easy as online shopping." new Home Purchase applications on the decline Despite a monthly Decline, august new home purchase applications remaineD higher than last year. M ortgage applications for new home purchases fell in august, as the homebuying season came to a close, ac- cording to Builder application survey (Bas) data for august 2015 from the mortgage Bank- ers association (mBa) released in september. new home mortgage ap- plications show mortgage applications dropped 6 percent over the month of august, not including any typical seasonal pattern adjustments. "as the summer winds down, mortgage applications for new homes saw a seasonally-driven decrease in august," said lynn Fisher, mBa's Vp of research and economics. "however, applications for new homes were still up 19 percent relative to the same month last year, which is consistent with what we've seen so far in 2015." of all the new home applica- tions, conventional loans made up 68.5 percent of loan appli- cations, Fha loans composed 19.0 percent, rhs/usDa loans made up 0.9 percent, and Va loans composed 11.6 percent, the mBa data showed. mBa also noted new home average loan size increased from $316,995 in July to $317,035 in august. the association forecasted new single-family home sales were running at a season- ally-adjusted annual rate of 524,000 units in august, based on data from the Boundary and annexation survey. the esti- mate is 1.9 percent lower than the July pace of 534,000. the mBa estimated, on an unadjusted basis, that there were 41,000 new home sales in august 2015, 6.8 percent lower than the 44,000 new home sales in July.

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