Today's Best Mortgage and Refinance Rates: January 5, 2021 | Rates Start the Year Lower

Home prices continued growth in November with the cost of more affordable homes increasing more than higher-priced homes. Mortgage rates, meanwhile, continued their downward trend in the new year.

Today's Mortgage Rates

The average interest rate on a 30-year fixed-rate mortgage was 2.973% on Monday — down from 3.026% on Thursday. (Lenders did not release new rates on Friday in observance of New Year's Day.)

Money's mortgage rates include the data from over 8,000 lenders across the United States and are updated daily. These rates include discount points and represent what a borrower with a 20% down payment and a 700 credit score — roughly the national average FICO score — would have been offered.

Source: Money | Date: Jan. 4, 2021 | Rates assume a credit score of 700

Freddie Mac's widely quoted Primary Mortgage Market Survey put rates at 2.67% with 0.7 points paid for the week ending December 31. That's 0.01 percentage points above the prior week's historic low. Rates set new record lows 16 times in 2020. The mortgage purchaser's weekly survey reflects borrowers who put 20% down on conforming loans and have excellent credit.

How do I get the best mortgage rates?

Mortgage rates vary from state-to-state. On Monday, borrowers in Illinois were quoted the lowest mortgage rates — at 2.946%. People looking for mortgages in Arizona saw the highest average rate at 3.164%.

Nationwide, borrowers with the highest credit scores, 740 and above, were quoted rates averaging 2.823%, while those with credit of 620 or below were shown rates of 4.433%.

You may be able to negotiate a better rate if you shop around or if you have other accounts with the lender. (Money's picks for the best mortgage lenders are here.) Currently, some lenders are hiking up advertised rates to keep demand in check, so you may be offered a lower rate if you reach out directly.

Today's Mortgage Refinance Rates

Money's survey also shows that the offered rate for a 30-year refinance for someone with a 740 credit score was 3.053% on Monday. In January 2020, the average mortgage rate (including fees) was around 3.8%.

Source: Money | Date: Jan. 4, 2021 | Rates assume a credit score of 740

What else is happening in the housing market today?

Home prices were up 8.2% year-over-year in November, according to CoreLogic's Home Price Index. That's the fastest annual price appreciation since March 2014. Prices were also up 1.1% from October.

"The housing market performed remarkably well in 2020 despite the volatile economic state,” said Frank Martell, CEO of CoreLogic. “While we can expect to see lingering effects of COVID-19 resurgences and subsequent shutdowns in the early months of 2021, vaccine distributions and stimulus actions should revitalize economic activity and keep home purchase demand and home price growth strong.”

However, climbing prices are leading to affordability challenges for lower-income and first-time home buyers. As a result, CoreLogic expects buyer demand to start to slow down in 2021, leading to a deceleration in price growth. The data analytics company expects price growth to decline from an average of 7.5% during the first half of 2021 to about 2.5% by November.

The data from the HPI indicates that the more affordably priced homes are experiencing higher price growth than more expensive properties. According to CoreLogic Chief Economist Frank Nothaft, the strong demand for starter homes is caused by a large number of Millennial and Generation X homebuyers entering the market.

“Lower-priced home values increased about one and a half times faster than higher-priced home values in November, as first-time buyers tend to seek out homes within the lower price ranges,” said Nothaft

Mortgage Prediction of the Week

Expert views on what comes next.

Ali Wolf, chief economist at Zonda Home, a housing market research firm, on how the economy will influence mortgage rates in 2021:

Economists and analysts alike expect economic activity to unleash during the second half of 2021 once the vaccine becomes widely distributed."

For more read: 2021 Real Estate Predictions: How Vaccines, President Biden and More Could Shape Housing Trends

More from Money:

7 Things to Do Now if You Want to Refinance Your Mortgage in 2021

9 Steps to Take Now That Will Prepare You for Buying a Home in 2021

Money's 2021 Real Estate Outlook: What to Expect for Mortgage Rates, Home Prices and More

Rates are subject to change. All information provided here is accurate as of the publish date.