Today’s Best Mortgage & Refinance Rates — December 30, 2020
Comprehensive guide to mortgage rates on December 30, 2020, with analysis and refinancing options.
Today’s Best Mortgage and Refinance Rates: December 30, 2020
The mortgage market continues to show strength as we approach the end of 2020, with rates sliding back down from previous levels. The average interest rate on a 30-year fixed-rate purchase mortgage was 3.065% on Tuesday, representing a slight decline from 3.114% on Monday. This downward trend reflects the ongoing market dynamics shaped by economic conditions and Federal Reserve policy throughout the pandemic year.
Home price growth reached a new record during October as homebuyers sought larger homes in suburban areas, a trend that has accelerated throughout the year. Meanwhile, mortgage rates have provided attractive financing opportunities for both first-time homebuyers and those considering refinancing their existing mortgages. Understanding the current rate landscape is essential for anyone planning to purchase a home or refinance their existing loan.
Understanding Today’s Mortgage Rates
Money’s mortgage rates are compiled from data across over 8,000 lenders throughout the United States and are updated daily to provide the most current market information. These rates include discount points and represent what a borrower with a 20% down payment and a 700 credit score — approximately the national average FICO score — would typically be offered by lenders.
The benchmark set by Money’s comprehensive survey offers insight into what mainstream borrowers can expect to see in the current market. These figures account for various loan products and borrower profiles, making them a valuable reference point for anyone shopping for mortgage rates or considering refinancing options.
Current Mortgage Rates Table
| Loan Type | Average Rate |
|---|---|
| 30-Year Fixed Loan | 3.065% |
| 15-Year Fixed Loan | 2.279% |
| 30-Year FHA Loan | 3.072% |
| 30-Year VA Loan | 3.182% |
| 30-Year Jumbo Loan | 3.562% |
Source: Money | Date: Dec. 29, 2020 | Rates assume a credit score of 700
Historic Mortgage Market Achievement
Freddie Mac’s widely quoted Primary Mortgage Market Survey reported rates at 2.66% with 0.7 points paid for the week ending December 24. This marks the 16th new record set in 2020, demonstrating the extraordinary year for mortgage rates. The mortgage purchaser’s weekly survey reflects borrowers who put 20% down on conforming loans and have excellent credit scores, providing another important benchmark for market conditions.
The achievement of multiple record lows throughout 2020 reflects the unprecedented monetary policy response to the COVID-19 pandemic. The Federal Reserve’s actions, including maintaining near-zero interest rates and purchasing substantial amounts of mortgage-backed securities, have contributed significantly to keeping mortgage rates at historic lows throughout the year.
How to Get the Best Mortgage Rates
Securing the best mortgage rate requires understanding the various factors that influence rate quotes and taking strategic steps to optimize your borrowing terms. Several key considerations can significantly impact the rates you receive from lenders.
Geographic Rate Variations
Mortgage rates vary considerably from state to state based on local market conditions and lender competition. On Tuesday, borrowers in Illinois received the lowest mortgage rate quotes at 2.968%, while those in Nevada saw the highest average rate at 3.206%. This 24-basis-point spread illustrates how location can meaningfully affect borrowing costs.
The variation across states reflects differences in local housing markets, competitive dynamics among lenders, and regional economic factors. Borrowers should research rates in their specific state or region to understand the baseline rates they might expect before factoring in personal financial factors.
Credit Score Impact
Your credit score remains one of the most significant determinants of the mortgage rate you receive. Nationwide, borrowers with the highest credit scores of 740 and above were quoted rates averaging 2.841%, while those with credit scores of 620 or below faced rates of 4.499%. This substantial 165-basis-point difference between high and low credit scores demonstrates the enormous financial impact of maintaining strong credit.
Improving your credit score before applying for a mortgage can result in meaningful savings over the life of your loan. Even modest improvements in your credit profile can translate to lower rates and reduced monthly payments. Most lenders use credit scores as a primary factor in determining rates, making credit quality management essential for anyone planning to borrow.
Shopping Around and Negotiating
You may be able to negotiate a lower rate if you shop around or maintain other accounts with the lender. Currently, some lenders are strategically hiking advertised rates to manage demand, meaning the rates displayed online may not reflect what borrowers can secure through direct negotiations or by shopping multiple lenders.
Taking time to contact several lenders directly can reveal opportunities for better terms than what appears in advertising. Lenders often have flexibility in their rate offerings, particularly for borrowers with strong financial profiles. Demonstrating loyalty through existing accounts or offering to consolidate banking relationships with a single institution can sometimes result in rate reductions.
Today’s Mortgage Refinance Rates
Homeowners with existing mortgages should carefully evaluate refinancing opportunities in the current market. Money’s survey shows that the offered rate for a 30-year refinance for someone with a 740 credit score was 3.177% on Tuesday. Last December, the average mortgage rate including fees was 3.88%, meaning refinancing opportunities represent meaningful savings for many homeowners.
Refinance Rates Table
| Loan Type | Average Rate |
|---|---|
| 30-Year Fixed Loan | 3.177% |
| 15-Year Fixed Loan | 2.584% |
| 30-Year FHA Loan | 3.415% |
| 30-Year VA Loan | 3.313% |
| 30-Year Jumbo Loan | 3.507% |
Source: Money | Date: Dec. 29, 2020 | Rates assume a credit score of 740
Refinancing Savings Example
Consider a concrete example of refinancing benefits. A homeowner with a $200,000 mortgage balance currently paying 3.88% on a 30-year loan could potentially cut their monthly payment from approximately $940 to about $862 by financing at current lower rates. This represents $78 in monthly savings, or $936 annually, demonstrating the substantial financial impact refinancing can achieve.
However, to determine if refinancing makes financial sense, homeowners must also consider the closing fees paid on their current mortgage, the charges imposed by the new lender, and how much time remains on their existing loan term. In many cases, the break-even point on refinancing occurs within 18 to 36 months, making refinancing an attractive option for those planning to remain in their homes long-term.
Market Context and Housing Trends
The mortgage rate environment exists within a broader housing market context. Existing home sales decreased in November, breaking a trend of five consecutive months of gains. However, sales remain well above 2019 levels, indicating continued strength in the residential real estate market despite the temporary slowdown.
Home prices continue climbing while inventory reached a new low, creating a competitive environment for buyers. The sale of new single-family homes was also down, reflecting supply constraints affecting both the existing and new home markets. Despite these headwinds, mortgage rates remain historically favorable, continuing to support housing demand.
Key Takeaways for Borrowers
The mortgage market on December 30, 2020, presents attractive opportunities for both homebuyers and those considering refinancing. Key considerations include:
- 30-year fixed rates remain below 3.1% for well-qualified borrowers with average credit scores
- Geographic location matters, with rate variation of up to 24 basis points across states
- Credit score significantly impacts rates, with potential 165-basis-point spread between high and low scores
- Shopping around and negotiating can yield better terms than advertised rates
- Refinancing opportunities remain attractive, particularly for those with older mortgages
- Historic record lows set throughout 2020 provide context for current favorable rates
Frequently Asked Questions
Q: What factors determine the mortgage rate I receive?
A: Your credit score, down payment percentage, loan type, loan term, state of residence, and current market conditions all influence your mortgage rate. Lenders typically offer better rates to borrowers with higher credit scores, larger down payments, and shorter loan terms.
Q: Should I refinance my mortgage now?
A: If current mortgage rates are significantly lower than your existing rate and you plan to stay in your home long enough to recoup closing costs, refinancing can produce substantial savings. Calculate your break-even point by dividing total closing costs by monthly savings to determine if refinancing makes sense for your situation.
Q: How often are mortgage rates updated?
A: Money updates mortgage rates daily based on surveys of over 8,000 lenders across the United States. Freddie Mac publishes its Primary Mortgage Market Survey weekly. Other sources such as Bankrate also update rates regularly to provide current market information.
Q: What is the difference between discount points and the stated rate?
A: Discount points are fees borrowers can pay upfront to reduce their mortgage rate. The rates reported by Money include these points, meaning the quoted rate reflects what borrowers would receive after accounting for typical point payments in the current market.
Q: Why do rates vary between 15-year and 30-year mortgages?
A: Shorter loan terms typically offer lower interest rates because lenders face less risk over a shorter repayment period. The 30-year mortgage rate of 3.065% is higher than the 15-year rate of 2.279%, reflecting the additional risk and extended time period for 30-year loans.
Q: What is a jumbo loan and why does it have a higher rate?
A: Jumbo loans exceed the conforming loan limits set by government-sponsored enterprises and carry higher rates because they cannot be purchased by Fannie Mae or Freddie Mac, creating additional risk for lenders. At 3.562%, the 30-year jumbo rate is approximately 50 basis points higher than the standard 30-year rate.
Q: How can I improve my chances of getting the best available rate?
A: Improve your credit score before applying, save for a larger down payment, compare rates from multiple lenders, consider different loan terms, and maintain other banking relationships with your chosen lender. Demonstrating financial stability and shopping strategically can help secure better terms.
References
- Today’s Best Mortgage & Refinance Rates — December 30, 2020 — Money. 2020-12-30. https://money.com/todays-mortgage-rates-12-30-2020/
- What did the Fed do in response to the COVID-19 crisis? — Brookings Institution. https://www.brookings.edu/articles/fed-response-to-covid19/
- What Determines the Rate on a 30-Year Mortgage? — Fannie Mae Research and Insights. https://www.fanniemae.com/research-and-insights/publications/housing-insights/rate-30-year-mortgage
- Data Spotlight: The Impact of Changing Mortgage Interest Rates — Consumer Finance Protection Bureau. https://www.consumerfinance.gov/data-research/research-reports/data-spotlight-the-impact-of-changing-mortgage-interest-rates/
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