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By Leslie Cook
October 3, 2020

Borrowers with 700 credit scores were quoted an average rate of 3.454% to secure a 30-year fixed-rate purchase mortgage on Thursday, according to Money’s most recent 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 4.336%. Our rates include discount points and are for borrowers putting 20% down.

30-year fixed-rate purchase mortgage
3.454%
Rate of October 1, 2020
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View Rates for January 16, 2021

Borrowers in Alaska were quoted the lowest mortgage rates on Thursday — at 3.242%. Those in Georgia saw the highest average rate at 3.685%. Nationwide, borrowers with the highest credit scores, 740 and above, were quoted rates averaging 3.004%, while those with credit of 640 or below were given rates of 4.738% — a 1.734 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 most recent survey also shows that the offered rate for a 30-year refinance for someone with a 740 credit score was 3.587% on Thursday. Last October, the average mortgage rate (including fees) was 3.859%.

30-year fixed-rate mortgage refi
3.587%
Rate of October 1, 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 $908 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).

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The Week in Review

The housing market continues its hot streak with few signs of slowing down.

Price growth, buyer interest and sales pace are all higher in suburban areas than urban ones. According to a report by Realtor.com, suburban home prices have increased by 3.2% since early March, while urban home prices have increased by 2.3%. The difference is more marked in the ten largest metro areas as suburban homes have seen a 5.2% price increase compared to 2.4% for urban areas.

There’s also been a difference in time on the market as the COVID-related lockdowns have eased. By the end of summer, suburban homes were selling 11% faster than in 2019 and urban homes 8% faster. As a result of this high demand, housing inventory has steeply declined, with supply in suburban areas down 41% from last year and urban areas down 34%.

Nationally, home prices posted an annual gain of 4.8% during the month of July, slightly higher than the 4.3% increase seen in June, according to the CoreLogic Case Shiller National Home Price Index. The 10-city composite index was up 3.3% year-over-year, higher than the 2.8% annual gain seen in June, while the 20-city composite index posted an annual gain of 3.9% compared to a gain of 3.5% in June. The city of Phoenix led the way with a 9.2% annual price increase, followed by Seattle (7.0%) and Charlotte (6.0%).

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Meanwhile, as pending home sales for the month of August increased by 8.8%, the fourth straight month of gains, according to the National Association of Realtors’ Pending Home Sales Index. The index reached a record high of 132.8 as contract signings were up 24.2% year-over-year. All four real estate regions enjoyed gains, led by the West (up 13.1% month-over-month), and followed by the South and Midwest (up 8.6% each), and the Northeast (up 4.3%). All four regions experienced double-digit year-over-year increases.

September is traditionally a good month for homebuyers — more homes are usually for sale, there’s less competition, and home prices are lower. This year the first month of fall turned into a highly competitive month instead. Housing inventory, which is typically 17% higher than in January, was down 21% this September. Home prices, typically only 10% above start-of-year prices, were 17% higher. Home sales are selling 12 days faster as well — 39% faster than in January.

The number of homeowners taking advantage of forbearance plans continues to decline, dropping six percentage points to 6.87% of all mortgage loans, according to the Mortgage Bankers Association. The MBA estimates the there are now 3.4 million homeowners currently enrolled in the payment deferral programs.

The MBA also reported that the volume of mortgage loan applications decreased by 4.8% for the week ending September 25. Purchase loans were down 2% week-over-week, while refinance loans were down 7%. Both, however, were still well above 2019 levels, with gains of 22% and 52% respectively.

On the labor front, the Labor Department reported that the economy added 661,000 jobs in September, below economists’ expectations of 800,000. The gains were led by the leisure and hospitality industry with an increase of 318,000, followed by retail (142,000) and health and social assistance (108,000). The unemployment rate decreased by 0.5 percentage points to 7.9%, while the number of unemployed fell by 1 million to a total of 12.6 million.

However, both numbers remain well above pre-pandemic levels. (In February, the unemployment rate was 3.5%.) As of the end of September, the economy has recovered 12 million of the 22 million jobs lost in mid-March when the pandemic related lockdowns began.

Meanwhile, initial unemployment claims dropped to 837,000 for the week ending September 26, slightly below economists’ expectations of 850,000 claims. Continuing claims were down by 980,000, bringing the total to 11,767,000. The seasonally adjusted insured unemployment rate dropped to 8.1%.

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Bottom line:

Mortgage Rates Vary From State to State. Here’s How to Get the Best Deal if You’re Moving

Home Equity Is Soaring — if You’re Tempted to Borrow Against Your Home, Read This First

Everyone Wants to Buy a House Right Now. 9 Experts Predict How Long Demand Will Soar

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