Real estate agents have already experienced a slowdown in showings since the expiration of the home buyer's tax credit. However, a drop in mortgage rates on jumbo home loans could signal a sign of improved economic conditions in some parts of the country. For months, non-conforming properties sat on the market as buyers avoided mortgage rates that were two full percentage points or more higher than the average for conforming loans.
Now, the spread has narrowed, with some mortgage lenders pricing jumbo loans in the five percent range. A Wall Street Journal report cited sources at some of the country's largest banks, speculating that stronger competition for high dollar value loans would help get wealthier buyers to invest again. The jumbo mortgage rate improvement comes as good news for homeowners ticking down the last few months of the promotional periods on ARM loans closed before the financial crisis.
Mortgage rates help sellers too
Competitive jumbo mortgage rates can help home sellers, too. Some homeowners with underwater mortgages have been forced to list properties below the Fannie Mae limit of $417,000. Even in cities designated "high cost," where conforming loan limits have been raised to $729,750, sellers have sacrificed equity to attract buyers. With jumbo rates falling, buyers may be more willing to look at homes with higher price tags.
Falling rates on jumbo loans also mean good news for banks, as they try to unload short sale and foreclosure properties. If attractive interest rates can get buyers shopping for large homes again, lenders can potentially recapitalize after sustaining major losses throughout 2008 and 2009. As money trickles back into the jumbo loan market, investors in securitized mortgage portfolios may start to see positive returns once more.
Compare mortgage rates
Requesting mortgage quotes from a variety of lenders can give you the best chance of landing one of these attractive, new jumbo loan deals. Not every bank has taken such an aggressive stance toward courting big ticket sales. That means you might get a wide range of responses to your quote requests, including a few refusals. However, it's becoming more likely that you'll find partnership with a lender who understands your desired property's long term potential.