November mortgage rates make it easier to buy or refi

White house on top of money

Anyone out to buy or refinance a home this month should be delighted to find that mortgages are cheaper than they were last November.

That's surprising because a year's past since the Federal Reserve ended a campaign to drive down long-term interest — a move that was widely expected to push mortgage rates higher.

But weak demand for home loans and all sorts of foreign crises that have investors rushing to the relative safety of U.S. mortgage debt trumped the Fed's policy change and held rates down.

The average cost of a conventional 30-year fixed-rate home loan — the most popular way to finance a home — costs more than a tenth-of-a-point less than this time last year.

That decline reduces payments by about $10 a month for every $100,000 borrowed.

This month the average cost of a 30-year jumbo mortgage plunged to a new record low that's actually below than that of smaller conventional fixed-rate mortgages.

And remember, that's the average cost of financing a home. Savvy borrowers with decent credit can almost always pay a quarter to half of a point less.

Spend a few minutes searching our extensive database for the best current mortgage rates from dozens of lenders in your area. You'll see what we mean.

National Average Mortgage Rates

Type of loan Current average Record-low average Established
30-year fixed rate 3.98% 3.50% Dec. 5, 2012
15-year fixed rate 3.23% 2.75% May 1, 2013
30-year fixed jumbo 3.87% 3.87% Nov. 4, 2015
5/1 ARM 3.28% 2.63% May 1, 2013

Jumbo loans are mortgages that are too large to be purchased by Fannie Mae and Freddie Mac, the two government-owned companies that buy or guarantee most of the mortgages issued by banks and other lenders.

The largest loans they can buy depend on where the home is located but range from $417,000 in most places to $625,000 in the nation’s most expensive cities.

Jumbo mortgages are most needed by affluent buyers whose savings and earnings have rebounded from the recession more quickly and fully than those of middle-income families.

They've driven a surge in the sales of high-end homes that has jumbo lending accounting for about one-fifth of all new mortgages, up from about 5% of the market in 2009.

The nation's largest banks, including J.P. Morgan Chase, Bank of America and Wells Fargo, are vying for that business by not only lowering rates but by reducing the minimum credit score and down payment required for million-dollar loans.

J.P. Morgan, for example, recently announced it was lowing the minimum acceptable FICO score from 740 to 680 and accepting down payments of as little as 15% on homes up to $3 million.

The sale of such pricey property has helped to push median home costs and average loan values to all-time highs this summer, eclipsing previous records set at the peak of the housing bubble in 2006 and 2007.

Despite that, a report from the Consumer Financial Protection Bureau says nearly half of Americans seriously consider only one lender or broker before applying for a mortgage. And about 75% fill out an application with only one lender.

Why are so many of us failing to comparison shop?

"It is a surprising finding, and it suggests that they're still fairly intimidated by the mortgage transaction," Richard Cordray, head of the government bureau, told NPR. "Or they're a little distracted because, at the same time, they're picking out a house."

Possibly. But rates are so low that some modest shopping around can land home buyers a once-in-a-lifetime mortgage.

8 critical questions Loan Estimates answer

Right after you apply for a mortgage, you'll receive a new form called a Loan Estimate. It was designed by the Consumer Financial Protection Bureau to be an easier to understand replacement for the lender-created Good Faith Estimates borrowers had been receiving. It explains the key terms, from interest rates to closing costs, and insures you're getting the home loan your lender promised.

It wasn't supposed to be like this after the Federal Reserve stopped flooding the mortgage market with money last year.

Back in the fall of 2012, the nation's bank-for-banks began buying $85 billion worth of debt a month, a fairly even split between Treasury bills and bonds backed by thousands of home loans.

That pushed mortgage rates to record lows in an attempt to boost real estate sales and property values.

With the housing market improving, the Fed gradually reduced those bond purchases last year and ended them altogether in November.

Experts expected mortgage rates to rise by anywhere from a half point to as much as a full point.

But the demand for home loans fell precipitously in 2014.

Refinancings were off by 60%, and new loans to buy properties fell 15%. All in all, Americans took on less new mortgage debt than in any year since 1997.

A never-ending run of foreign crises — everything from the Greek debt crisis and weak economic growth in Europe to a crashing Chinese stock market — has lots of investors willing to buy bonds containing thousands of American home loans.

As a result, there's still plenty of money to fund all of the mortgages being written, and that's been reflected in lower interest rates.

The Fed's exit from the market just hasn't mattered — at least so far.

The Mortgage Bankers Association now projects the average cost of a 30-year fixed-rate loan will rise to 4.8% by the end of 2016 and 5.4% by late 2017.

But mortgage lending (as measured by the amount borrowed, not the number of loans) grew by a third during the first half of the year, driven by the resurgent demand for jumbo loans.

That was more than anyone expected and could help to push rates higher than projected for next year.

The 7 biggest mortgage mistakes

A mortgage is the biggest debt most of us will ever carry. That's why it's so important to avoid pitfalls like letting the bank decide how much house you can afford or failing to check your credit before you try to buy. These mistakes can cause you to pay more than you need to, prevent your loan from closing or even lead to foreclosure.

For now, however, home loans are not only cheaper, they're also easier to get, even for buyers not in the jumbo market.

Home buyers who qualified for conventional loans had an average FICO credit score of 763 in 2012, according to Ellie Mae.

By last year, that had fallen to 755, and that's about where it's remained for the first nine months of this year, according to the most recent data.

The average FICO score for homeowners who refinanced through a conventional loan fell from 747 in 2013 to 733 last year and 728 in September.

FHA loans clearly helped borrowers with too much debt and lower credit scores.

The average FICO score for those home buyers fell 700 in 2012 to 684 last year before rising slightly to 689 in September.

Those are exactly the kinds of trends that help borrowers land the loans they need.