Want a Cheaper Mortgage? Go to a Smaller Bank

Interest rates for 30 year fixed-rate mortgages have fallen to record lows. They averaged 4.44% on Aug. 12, according to Freddie Mac, the lowest level since the organization started keeping records in 1970. But consumers can get even better deals -- at smaller banks and credit unions.

At the three big banks -- Bank of America (BAC), Wells Fargo (WFC) and JPMorgan Chase (JPM) -- rates average 4.66% on 30-year fixed mortgages, according to Bankrate.com. The Wall Street Journal reports that "St. Louis's Heartland Bank is offering a rate of 4.5%. Acacia Federal Savings Bank comes in at 4.25%. And Rockland Trust Co. in Boston is offering just 4.13%. (None of these offers include "points," or extra fees to secure lower rates.)"

Furthermore, "the discrepancy is widening, and I only expect it to get wider in the future," the Journal quotes Guy Cecala, publisher of Inside Mortgage Finance, an industry newsletter, as saying.

The reason for this trend is consolidation among home lenders during and after the financial crisis. The three large banks above accounted for 56.5% of new mortgage originations in the first half of this year, according to Inside Mortgage Finance -- up from just 36.6% in 2007, reports the Journal. These banks feel less need to compete on price.