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September 23rd, 2009

Jumbo Rates at 4-Year Lows

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The rate for 30-year fixed jumbo mortgage loans fell to an average of 6.14% last week, the lowest weekly average since September 2005, according to HSH Associates. Jumbo rates are even down significantly from this time last year, when they rung in at 7.36%.

Renewed Interest

The return of several big-name lenders to the jumbo market has presented borrowers with the un-familiar opportunity to shop around — a luxury jumbo borrowers haven’t been used to for some time. Many analysts agree that competition is the main force behind the falling rates.

When the housing market toppled, lenders nationwide were being burned by Jumbo loans — a loan amount above Fannie and Freddie’s limit of $417,000 . However, the renewed interest in jumbos indicates that lenders are once again beginning to view these real estate loans as a good investment, and for good reason.

Profits to be Made

You likely noticed that the jumbo rate’s four-year low is still substantially higher than the current 30-year conforming rate (for the latest on current mortgage rates and news, be sure to read our Market Trends Newsletter). Despite the nominal low, jumbo rates remain high relative to other investments. This enables lenders to make a much larger profit.

However, not all lenders are ready to return to the party. Guy Cecala, publisher of Inside Mortgage Finance says the Jumbo loans currently only represent five percent of the market, compared to 15% just two years ago.

It goes without saying that at least some of the jumbo’s diminished market share suggests that lenders have and will continue for some time to be extremely picky and demanding in terms of the borrowers they will lend to.

For a portion of the market that has suffered tremendously over the past two years, the fact that lenders are starting to look to serve this audience again is great news. These “non-conforming” borrowers’ access to credit has been curtailed to a great degree, perhaps unfairly, given that they are among the nation’s best borrowers.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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