The housing market remains hot as home prices and the pace of sales maintain year-over-year growth, fueled by low mortgage rates and low inventory. The third quarter saw record levels of mortgage loan originations, with refinances leading the way. Meanwhile, forbearance programs are set to expire at the end of the month, leaving millions of homeowners searching for options to avoid foreclosure.
Mortgages rates trended downward throughout the week.
Today's Mortgage Rates
The average rate for a 30-year fixed-rate purchase mortgage was 3.161% on Thursday. On Wednesday, the average rate was 3.169%.
Money's most recent mortgage rates include 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 700 credit scores — roughly the national average FICO score — would have been quoted.
|Mortgage Rates for December 11, 2020|
|Loan type||Average Rate|
|30-Year Fixed Loan||3.161%|
|15-Year Fixed Loan||2.369%|
|30-Year FHA Loan||3.303%|
|30-Year VA Loan||3.408%|
|30-Year Jumbo Loan||3.595%|
Source: Money | Date: Dec. 10, 2020 | Rates assume a credit score of 700
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 3.01%. People looking for mortgages in Nevada saw the highest average rate at 3.351%.
Nationwide, borrowers with the highest credit scores, 740 and above, were quoted rates averaging 2.859%, while those with credit of 620 or below were shown rates of 4.672%.
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 lenders 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 2.71% with 0.7 points paid for the week ending December 10. Rates remained unchanged from last week's new record low. The mortgage purchaser's weekly survey reflects borrowers who put 20% down on conforming loans and have excellent credit.
Today's Mortgage Refinance Rates
Money's most recent survey also shows that the offered rate for a 30-year refinance for someone with a 740 credit score was 3.358% on Thursday. Last December, the average mortgage rate (including fees) was 3.88%.
|Refinance Rates for December 11, 2020|
|Loan type||Average Rate|
|30-Year Fixed Loan||3.358%|
|15-Year Fixed Loan||2.657%|
|30-Year FHA Loan||3.814%|
|30-Year VA Loan||3.965%|
|30-Year Jumbo Loan||3.55%|
Source: Money | Date: Dec. 10, 2020 | Rates assume a credit score of 740
A homeowner with a $200,000 mortgage balance currently paying 3.88% on a 30-year could potentially cut their monthly payment from about $940 to about $882 by financing at the current 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).
5 Key Housing Stats From This Week
Interest Rates Stay Put
Interest rates were unchanged one week after setting a new record low. The average rate for a 30-year conventional mortgage was 2.71%, according to Freddie Mac's Primary Mortgage Survey. Rates have remained low despite recent increases in the yield on the 10-year Treasury , which would normally result in a corresponding increase in interest rates. Experts pointed out earlier in the year that rates could have been even lower if the usual relationship between the 10-year Treasury and mortgage rates held.
Home Equity Increased During the Third Quarter
Homeowners gained $1 trillion dollars in equity between the third quarters of 2019 and 2020, according to CoreLogic. This represents an average equity gain of $17,000 per homeowner, an 11% increase and the largest gain since the first quarter of 2014.
The increased home equity is good news for homeowners, as it provides a safety net in case of an unexpected economic setback. It has also allowed some homeowners who owed more than their homes were worth to actually regain equity. CoreLogic estimates that the number of underwater mortgages decreased to 1.6 million from 2 million.
Homeowners in Economic Distress Have Options to Avoid Foreclosure
The national loan forbearance program is set to expire at the end of the month. Put in place by the CARES Act, the program allows homeowners affected by COVID-19 to pause their mortgage payments. Homeowners can enter the program until December 31.
Before a homeowner exits a forbearance plan they need to come to an agreement with their lender on how to repay the paused payments. According to a report by Redfin, there are an estimated 3.3 million homeowners who may not be able to repay their mortgages once they exit the payment deferral plans, potentially setting off a wave of foreclosures.
Fortunately for most of these homeowners, rising home values and the resulting increase in home equity will provide plenty of other options, including refinancing their home loans. For those who may not qualify for a refinance and can't come to an agreement with their lender for repayment, selling the home is another option. Inventory is tight and homes are selling at a fast pace. A home sale will allow the owner to avoid foreclosure.
It's Still a Seller's Market
The housing market is not losing any steam despite the start of the holiday season.
According to Realtor.com, median home prices were up more than 13% year-over-year for the week ending December 5. Home prices have seen double-digit year-over-year growth for the past 17 weeks. Offsetting the higher home prices are record-low mortgage rates, which have kept buyers active in the market. Homes are selling 14 days faster than last year.
Inventory continues to be an issue. Even though new listings improved slightly, they were still 7% below last year's level. Overall inventory is 39% less than last year as well. Expect home prices to keep rising until inventory starts to catch up with demand.
Refinancing Reached Record Highs
Approximately 4 million homeowners have refinanced over $2 trillion in home loans since the beginning of 2020 through the end of September, according to data firm Black Knight. In the third quarter alone, refinances reached $867 billion, the largest quarterly lending volume ever. Purchase loans also set a quarterly record, reaching $455 billion.
Black Knight estimates there are still over 19 million high-quality refinance candidates in the market. The good news is that those who haven't refinanced their home loans yet will still have plenty of opportunities to do so as interest rates are expected to stay low for the foreseeable future.