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By Leslie Cook
December 21, 2020
Money; Getty Images

All-cash offers reached the smallest share of the housing market since 2007 as record-low interest rates make taking out a mortgage more affordable for most buyers. Bidding wars are still the norm, although fewer homes are seeing multiple offers come in.

Meanwhile, mortgage rates decreased again on Friday.

Today's Mortgage Rates

The average rate for a 30-year fixed-rate purchase mortgage was 3.039% on Friday. On Thursday, the average rate was 3.055%.

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 700 credit scores — roughly the national average FICO score — would have been quoted.

Mortgage Rates for December 21, 2020
Loan type Average Rate
30-Year Fixed Loan 3.039%
15-Year Fixed Loan 2.288%
30-Year FHA Loan 3.017%
30-Year VA Loan 3.143%
30-Year Jumbo Loan 3.592%
Source: Money | Date: Dec. 18, 2020 | 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 17. It is the 15th new record set this year. The mortgage purchaser's weekly survey reflects borrowers who put 20% down on conforming loans and have excellent credit.

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How do I get the best mortgage rates?

Mortgage rates vary from state to state. On Friday, borrowers in Illinois were quoted the lowest mortgage rates — at 2.944%. People looking for mortgages in Nevada saw the highest average rate at 3.164%.

Nationwide, borrowers with the highest credit scores, 740 and above, were quoted rates averaging 2.817%, while those with credit of 620 or below were shown rates of 4.489%.

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.

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 3.137% on Friday. Last December, the average mortgage rate (including fees) was 3.88%.

Refinance Rates for December 21, 2020
Loan type Average Rate
30-Year Fixed Loan 3.137%
15-Year Fixed Loan 2.587%
30-Year FHA Loan 3.447%
30-Year VA Loan 3.414%
30-Year Jumbo Loan 3.526%
Source: Money | Date: Dec. 18, 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 $858 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).

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What else is happening in the housing market today

Record low interest rates have led to fewer all-cash offers so far this year, according to online real estate site Redfin. About 24% of homes sold to date have been bought with cash, down from about 25% in 2019 and 10% less than the record high of 34% in 2013.

“With interest payments lower than ever before, many homebuyers would prefer taking out a home loan and putting their cash somewhere else, like the stock market, emergency savings accounts or home renovations,” said Daryl Fairweather, Redfin's chief economist.

Nassau County on Long Island in New York saw the largest share of all-cash offers, with almost 49% of home purchases being made with cash. The area is attractive to those leaving the Manhattan and Queens areas, as the availability of remote work makes it possible for more people to leave the high urban density of the city for more spacious living conditions in the suburbs.

All cash offers are more attractive to sellers because they can speed up the closing and eliminate the possibility of appraisal or financial issues popping up that could derail the sale. For buyers who can afford to pay all cash, they offer significant savings, since you don't have to pay interest on a loan.

Making an all-cash offer can also provide an advantage for buyers involved in a bidding war. “Many of the buyers who are using all cash this year are probably trying to beat out other offers in a situation with multiple offers,” noted Fairweather.

Redfin's data indicates that 54% of offers written by its agents faced at least one other offer, with even more competition for newly listed, ready-to-move-in condition homes.

“If you’re a buyer, you had better bring your best punch and expect competition. People are paying a premium for the latest and greatest, updated, remodeled, turnkey homes," said Justin Hess, a Redfin real estate agent in Denver, Colorado.

November marks the seventh straight month where over 50% of Redfin offers were involved in a bidding war. However, since reaching a peak of nearly 60% in August, the number of offers facing competition has cooled down. The slowdown is likely the result of a combination of not only cooling weather and the holiday season, but also the rise in COVID-19 infections, which have led to renewed lockdowns and restrictions in more vulnerable areas.

Mortgage Term of the Week

Understanding the lingo can be key to avoiding mistakes when you are buying a home or refinancing your mortgage. For more read: Everything You Need to Know About Mortgage Rates in 2020.

Foreclosure: The legal process used by a lender to recover the amount owed on a defaulted loan. In mortgage lending, it can result in the lender taking over and selling the foreclosed property.

More from Money:

The 21 Smartest Money Moves to Make in 2021

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