Comparing mortgage offers from multiple lenders is always a smart move, but shopping around grew especially critical during the interest rate run-up of 2022. According to new research by mortgage giant Freddie Mac, the payoff for bargain-hunting borrowers doubled last year.

From 2010 to 2021, Freddie Mac says, borrowers who applied with two different lenders reduced their mortgage rate by an average of 0.1 percentage point, or 10 basis points.

Those savings ballooned in 2022, when mortgage rates rose at their fastest pace in 40 years. The average rate savings for those who comparison-shopped rose to 20 basis points.

“It’s really important to shop around,” says Freddie Mac Chief Economist Sam Khater. “The returns to shopping around have doubled over the past year.”

During rate run-up, a wider range of offers

The volatile mortgage market of 2022 raised the stakes for shopping around. Freddie Mac points to a phenomenon with the wonky name of “rate dispersion” – the range of rates offered by lenders to the same borrower on the same day.

From 2010 through 2021, the average range in rate quotes was less than 20 basis points. But in 2022, that range widened to 50 basis points.

That gap means shopping around can pay off big. Say you’re in the market for a mortgage and your first offer for a $300,000, 30-year mortgage comes in at the high end of that range – 6.5 percent, for a monthly payment of $1,896.

Shopping until you find a mortgage at 6 percent would cut your monthly payment to $1,799. That’s a savings of $97 a month – nearly $1,200 a year, and nearly $6,000 over five years.

Mortgage borrowers shopping around stand to save more just as savers shopping around stand to gain more. — Greg McBride, Bankrate’s chief financial analyst

Of course, it’s possible that a buyer who doesn’t look around gets lucky, scoring the best rate with the first offer. But with rate quotes coming in all over the map, Freddie Mac says borrowers might need to get as many as five quotes to make sure they land the best deal.

“This is not surprising,” says Greg McBride, Bankrate’s chief financial analyst. “It’s an accordion effect of sorts — as rates rise, the disparity between what terms are quoted in the marketplace expands. Mortgage borrowers shopping around stand to save more just as savers shopping around stand to gain more.”

How to shop around for a mortgage

American consumers are conditioned to hunt for bargains on just about everything they buy. But many people fall short when it comes to comparison-shopping for home loans. “We shop around more for shoes and coats than we do for [mortgage] rates,” Khater says.

One obvious culprit is that home loans are complicated and difficult to understand. “Getting a mortgage is just overwhelming for a lot of people,” he says.

When shopping around for a mortgage, it’s important to compare rates, first and foremost. Bankrate’s mortgage rate tables let you enter basic information about your finances and location to receive customized offers.

When comparing offers, consider both the interest rate and annual percentage rate (APR). Interest rates can be fixed or variable and are determined by market factors and your own creditworthiness. The APR, on the other hand, includes the interest rate and fees incurred when borrowing. The APR is the better tool for comparing the cost of a mortgage. However, if you’re not planning to stay in a home long-term, the interest rate might matter more, since APR assumes you’ll stick with the loan over its full term.

Keep in mind, though, that the interest rate only tells you so much about the cost of buying a home. You need to look at all the fees connected with your financing, many of which you’re required to pay upfront. Lenders typically disclose these additional closing costs on the loan estimate they send you. The difference in closing costs, which can run from 2 to 5 percent of your mortgage, might turn out to be more important than small differences in the interest rate.