CFPB reports more consumers paid points as mortgage rates rose

The CFPB has issued a report, Trends in discount points amid rising interest rates, finding that more borrowers paid “discount points” upfront as overall interest rates rose. The percentage of homebuyers paying discount points roughly doubled from 2021 to 2023. The increase was even greater among borrowers with lower credit scores. In its press release releasing the report, the CFPB said that, “while discount points may provide advantages to some borrowers, the financial tradeoffs are complex.” The CFPB is monitoring these increases and potential risks to consumers.

According to the press release, discount points are a one-time fee paid at closing to a lender in exchange for a lower interest rate. Paying one discount point is the equivalent of paying a fee of one percent of the loan amount, but discount points have no fixed value in terms of the change in interest rate. Most borrowers only benefit from discount points if they keep their mortgage long enough that the cumulative monthly savings from the reduced interest rate outweigh the upfront costs.