Borrowers with 700 credit scores were quoted an average rate of 3.502% to secure a 30-year fixed-rate purchase mortgage on Wednesday, according to Money's daily survey of over 8,000 lenders across the United States. At this credit score, roughly the national average, the rate for a 30-year refinance was 4.431%. Our rates include discount points and are for borrowers putting 20% down.
|30-year fixed-rate purchase mortgage|
|Rate of September 30, 2020|
Borrowers in Washington, D.C. were quoted the lowest mortgage rates on Wednesday — at 3.284%. Those in Nevada saw the highest average rate at 3.768%. Nationwide, borrowers with the highest credit scores, 740 and above, were quoted rates averaging 3.01%, while those with credit of 640 or below were given rates of 4.802% — a 1.792 percentage-point spread.
You may be able to negotiate a lower 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 banks are hiking up advertised rates to keep demand in check, so you may be offered a lower rate if you reach out directly.
Freddie Mac's widely quoted Primary Mortgage Market Survey put rates at 2.88% with 0.8 points paid for the week ending October 1. The mortgage purchaser's weekly survey reflects borrowers who put 20% down on conforming loans and have excellent credit.
Refinance rates today
Money's survey also shows that the offered rate for a 30-year refinance for someone with a 740 credit score was 3.708% on Wednesday. Last October, the average mortgage rate (including fees) was 3.859%.
|30-year fixed-rate mortgage refi|
|Rate of September 30, 2020|
A homeowner with a $200,000 mortgage balance currently paying 3.859% on a 30-year loan could potentially cut their monthly payment from $939 to $921 by financing at today's lower rates. To determine if it's worth it to refinance your mortgage, also consider the closing fees you paid on your current mortgage, how much your new lender is charging and how long you have left on your loan term. (Our picks for the best lenders for refinancing are here).
What else is happening in the housing market right now?
Pending home sales marked the fourth straight month of gains, increasing 8.8% during the month of August according to the Pending Home Sales Index released by the National Association of Realtors. Year-over-year, contract signings increased 24.2% as the index reached a record high of 132.8 (a reading of 100 is equal to the level of contract signings in 2001).
"Tremendously low mortgage rates — below 3% — have again helped pending home sales climb in August," said Lawrence Yun, NAR’s chief economist. "Additionally, the Fed intends to hold short-term fed funds rates near 0% for the foreseeable future, which should in the absence of inflationary pressure keep mortgage rates low, and that will undoubtedly aid homebuyers continuing to enter the marketplace."
"While I did very much expect the housing sector to be stable during the pandemic-induced economic shutdowns, I am pleasantly surprised to see the industry bounce back so strongly and so quickly," Yun went on to add.
There were increases across all four of the regional indices, led by the West with a month-over-month increase of 13.1%. The South and the Midwest had pending homes sales gains of 8.6% each and the Northeast increased 4.3%. All four regions experienced double-digit gains year-over-year.
The trend seems to have continued into September, as what is usually the easiest time to buy a home turned into a highly competitive home buying market. September is typically a good month for homebuyers because there are usually more homes for sale, less competition and lower home prices. Not so in 2020. Compared to the beginning of the year, buyers are paying approximately $20,000 more to purchase a home and facing 25% more competition, according to Realtor.com's Monthly Housing Trend Report for September.
Housing inventory was down 21% this September compared to the beginning of the year. Typically inventory is 17% higher in September than January. Home prices, which are normally 10% above start-of-year prices, are running 17% higher. Homes are also selling 12 days faster — 39% faster than earlier this year.
"Many buyers tend to put their home search on hold after the start of the school year, but remote learning and the desire for more space continued to fuel buyer interest in September," said Danielle Hale, chief economist, Realtor.com. "Unseasonably high buyer interest coupled with historically low inventory and favorable mortgage rates are creating a perfect storm in the housing market. While this is good news for anyone looking to sell their home, it has created tremendous competition among buyers."
Despite the continued surge in homebuyer interest, concerns remain about a lack of inventory. Despite recent gains in new building permits and housing starts, it may not be enough to satisfy demand.
"As home buyers continue their search this fall, one headwind remains the insufficient number of listings for sale. The competitive purchase market is putting upward pressure on home prices and reducing affordability," said Joel Kan, the associate vice president of economic and industry forecasting for the Mortgage Bankers Association, commenting on the NAR report. "New construction has picked up significantly, but that pace may not be sustainable given the rise in builder material costs and the upcoming colder winter months. That is why more existing supply is needed to keep up with demand."
Mortgage Tip of the Week
Buying a home can be daunting. Follow these expert tips to make the process easier.
Jess Kennedy, co-founder of online mortgage lender Beeline:
For more on do-it-yourself renovations, read: Dreaming of a DIY Renovation? How to Remodel Without Hurting Your Pride or Property Value.