NCUA chief economist reports credit union members get lower mortgage interest rates

At the National Credit Union Administration Board’s second open meeting of 2020 yesterday, the organization presented results from a study showing credit union members could pay significantly lower interest rates on mortgages. According to “Interest Rates for 30-Year Fixed-Rate Mortgages Originated in 2018: Relative Findings for Credit Union Mortgages,” a study by the NCUA’s chief economist, credit union members could save thousands of dollars on their mortgages when compared to borrowers at other financial institutions.

The study finds:

  • Mortgage loans originated by credit unions generally carried lower interest rates than mortgage loans originated by other lenders;
  • The median interest-rate spread for credit union mortgages was 9 to 14 basis points lower than for other originators;
  • The discount in rates for credit union loans generally was observed in both urban and rural areas; and
  • Statistics for three credit risk indicators — credit scores, combined loan-to-value ratios, and debt-to-income ratios — suggested that differences in mortgage rates were not likely the result of differences in credit risk.

The lower interest rates could save credit union borrowers thousands of dollars over the life of their mortgage loans, the study finds. A borrower with a $175,000 mortgage, for example, could see total principal and interest payments nearly $5,000 lower with a 14-basis-point spread.

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The League of Southeastern Credit Unions & Affiliates represents 302 credit unions in Alabama, Florida and Georgia, with a combined total of $175 billion in assets and more than 11.6 million members. LSCU & Affiliates provides legislative and regulatory advocacy; education and training; cooperative initiatives (including financial education outreach); public messaging; information services; and business solutions.

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