Today's Best Mortgage and Refinance Rates: January 8, 2021 | Rates Tick Down

Consumer confidence in the housing market declined in December as the number of COVID-19 cases increased. People were less confident about selling their homes, which could lead to a worsening of an already tight supply of homes for sale.

Meanwhile, the average mortgage rate ticked down yesterday.

Today's Mortgage Rates

The average interest rate on a 30-year fixed-rate mortgage was 3.098% on Thursday — down from 3.109% on Wednesday.

Source: Money | Date: Jan. 7, 2021 | Rates assume a credit score of 700

Money's daily mortgage rates show the average rate offered by over 8,000 lenders across the United States the previous day. They reflect what a typical borrower with a 700 credit score might expect to pay for a home loan right now. The rates assume a 20% down payment and include discount points.

Freddie Mac's widely quoted Primary Mortgage Market Survey put mortgage rates at 2.65% with 0.7 points paid for the week ending January 7, setting a new record low. That's 0.02 percentage points below last week. Rates set new record lows 16 times in 2020. This is the first all-time low set in 2021. 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 Thursday, borrowers in Illinois were quoted the lowest mortgage rates — at 3.018%. People looking for mortgages in Nevada saw the highest average rate at 3.254%.

Nationwide, borrowers with the highest credit scores, 740 and above, were quoted rates averaging 2.875%, while those with credit of 620 or below were shown rates of 4.406%.

You may be able to negotiate a better interest rate if you shop around or if you have other accounts with the lender. (To get started, take a look at Money's picks for the best mortgage lenders.) 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 3.194% on Thursday. In January 2020, the average mortgage rate (including fees) was around 3.8%.

Source: Money | Date: Jan. 7, 2021 | Rates assume a credit score of 740

What else is happening in the housing market today?

Consumer confidence in the housing market dropped significantly in December. Fannie Mae's Home Purchase Sentiment Index decreased by 6 points from November to reach a reading of 74 points. That's the lowest level since May 2020, with both the 'Good Time to Sell' and 'Good Time to Buy' components falling.

According to Doug Duncan, chief economist at Fannie Mae, the decline is the result of increasing concern over the rise in COVID-19 infections and a slowing economy. Despite low mortgage rates and strong sales, the index remained well below pre-pandemic levels through the summer and fall. Year-over-year, the index is down 17.7 points.

The number of consumers who believe it is a good time to buy decreased from 57% in November to 52% in December. Those who believe it is a bad time to buy increased from 35% to 39%.

At the same time, the number of people who believe it is a good time to sell decreased from 59% to 50%, while those who believe it is a bad time to sell increased from 33% to 42%.

The latter is particularly worrying as the housing market is already suffering from a severe inventory deficit. Further reluctance from homeowners to put their homes on the market will only make the situation worse. The 18 point drop, noted Duncan, implies that homeowners may postpone placing their homes on the market, at least temporarily.

"If so, this could have the effect of perpetuating already tight inventory levels and supporting additional (albeit lesser) home price growth, which could contribute to a further moderating of home sales," he added.

The index is derived from Fannie Mae's National Housing Survey, which polls a nationally representative sample of 1,000 consumers about a number of housing and rental issues.

More from Money:

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

Current Mortgage Rates: 30-Year Mortgage Rates Hit a New Low