Today's Mortgage and Refinance Rates: December 28, 2020 | Rates Decrease

Existing home sales decreased in November, breaking a trend of 5 consecutive months of gains. However, sales remain well above 2019 levels. Home prices are still climbing while inventory reached a new low last month. The sale of new single-family homes was also down.

Meanwhile, mortgage rates were down by 0.62 percentage points.

Today's Mortgage Rates

The average rate for a 30-year fixed-rate purchase mortgage was 3.049% on Thursday, the most recent data available. On Wednesday, the average rate was 3.11%.

Money's mortgage rates include the data from over 8,000 lenders across the United States. These rates include discount points and represent what a borrower with a 20% down payment and a 700 credit score — roughly the national average FICO score — would have been quoted.

Source: Money | Date: Dec. 24, 2020 | Rates assume a credit score of 700

Freddie Mac's widely quoted Primary Mortgage Market Survey put rates at 2.66% with 0.7 points paid for the week ending December 24. It is the 16th new record set this year. 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 2.965%. People looking for mortgages in New Mexico saw the highest average rate at 3.134%.

Nationwide, borrowers with the highest credit scores, 740 and above, were quoted rates averaging 2.829%, while those with credit of 620 or below were shown rates of 4.457%.

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 3.173% on Thursday. Last December, the average mortgage rate (including fees) was 3.88%.

Source: Money | Date: Dec. 24, 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 $862 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).

What else is happening in the housing market today

Existing home sales during November decreased by 2.5% from October, according to a report issued last Tuesday by the National Association of Realtors.It’s the first time in six months that sales have declined. Still, sales came in at a seasonally adjusted annualized rate of 6.69 million units, nearly 26% higher than November of last year.

"Home sales in November took a marginal step back, but sales for all of 2020 are already on pace to surpass last year's levels," said Lawrence Yun, NAR's chief economist. "Given the COVID-19 pandemic, it's amazing that the housing sector is outperforming expectations."

Despite the decline, Yun expects the housing market to continue to rebound next year as low rates and buyer demand remain strong.

The slight downturn comes on the heels of a slowing economic recovery as the rise in COVID-19 infections has led to a new round of lockdowns and layoffs. According to Yun, this has led to a lack of consumer confidence in the market. There are hopes, however, that the distribution of the first COVID vaccines plus the new round of economic stimulus will keep the housing market robust during the upcoming year.

Meanwhile, the housing inventory was down to 1.28 million units, a decrease of nearly 10% from October and 22% from last year. The total number of homes still available for sale was 1.28 million units, representing an all-time low with a 2.3% month supply at the current pace of sales.

The pace of sales remained higher than usual, with homes staying on the market for 21 days. That’s 17 days faster than November 2019.

The combination of high demand, low-interest rates, and limited supply has led to record increases in home prices. The median price for existing homes of all types was $310,800, more than 14% higher than last year.

With no apparent slowdown in the buyer demand, next year may see some homebuyers priced out of the market as affordability becomes an issue.

“Housing affordability, which had greatly benefitted from falling mortgage rates, are now being challenged due to record-high home prices,” noted Yun. “That could place strain on some potential consumers, particularly first time buyers.”

New home sales were also down in November. According to data from the U.S. Census Bureau, sales of new single-family homes came in at a seasonally adjusted 841,000 units. It represents a decrease of 11% from October but is still nearly 21% higher year-over-year.

"The home building industry saw a historic gap between the pace of new home sales and construction of for-sale single-family housing this fall," said Robert Dietz, chief economist for the National Association of Home Builders. "As a result, the pace of new home sales was expected to slow to allow construction to catch up."

The inventory of newly completed homes in November was 43,000 units, down 43% from the same month last year.

Mortgage Tip of the Week

Buying a home can be daunting. Follow these expert tips to make the process easier.

“With any potential refinance, borrowers should make sure they fully understand the potential costs and savings associated with the refinance to assure the economics make sense,” said Mike Tassone, co-founder and COO at mortgage marketplace Own Up.

For more read: 7 Things To Do Now if You Want to Refinance Your Mortgage in 2021.

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