Jumbo Mortgage Rates Coming Down?

Jumbo mortgage rates have been coming down but rates are still considerably higher than conforming mortgage rates.

Historically jumbo mortgage rates tend to be just a little higher than conforming rates but recently rates are up to 2 percentage points higher.

Right now, 30 year fixed jumbo rates are running at 6.20 percent¹ and 30 year fixed conforming rates are 4.95 percent¹, 1.25 percent higher.  The gap is even wider for a 15 year fixed mortgage. Mortgage rates on conforming 15 year fixed mortgage are running at 4.63 percent¹ while rates on a 15 year fixed jumbo mortgage are 5.95 percent¹, 1.32 percent higher.

The gap between jumbo mortgages and conforming mortgages has widened recently because the secondary market (securitization market) for these loans hasn't functioned for over a year now. The securitization market is the process of packaging mortgages together into securities and selling those securities to investors.

Rates on conforming mortgages are lower because banks and financial institutions that issue the loans are able to resell conforming loans to Freddie Mac and Fannie Mae, freeing up capital to make more loans which lowers the interest rates on conforming loans.

Shannon Drury, a William Raveis real estate agent in Westport, CT, said "Jumbo mortgage rates are readily available but rates are higher than for conforming rates.  Some banks are also requiring a higher down payment on these homes."

While jumbo rates have come down from recent highs, don't expect them to close the gap on conforming loans until the mortgage securitization market makes a comeback in some shape or form.

¹Rate data provided by Informa Research Services, Inc.