Premium For Going Big Is On The Decline, Cheaper In Some CasesJuly 3, 2013
Having jumped to 4.46 percent last week, the average rate for a 30-year fixed mortgage has ticked down to 4.29 percent for conforming loans, up from 3.62 percent at the beginning of July last year.
At the same time, the premium for jumbo loans of over $625,500 in San Francisco has ticked down to a six-year low, an average of only 0.16 percentage points over conforming rates as deposit-rich banks seek returns on their capital and suppress rates to compete for wealthy customers.
In fact, Wells Fargo is advertising a 4.5 percent rate for both conforming and Jumbo 30-year fixed mortgages as of this morning, a discount to the 4.625 percent rate they’re advertising for super conforming loans of over $417,000 in high cost areas like San Francisco.
∙ 14 Percent Raise Needed To Keep Pace As Mortgage Rates Rise [SocketSite]
∙ Mortgage Rates Reverse Course and Tick Down [Freddie Mac]
∙ Wealthy Americans Benefit From Banks Hunting Jumbos [Bloomberg]
Comments from Plugged-In Readers
How big did the jumbo premium get?
I should remember, as bought down a lown below the 2 unit level to benefit from the super conforming rates 4 or 5 years ago..but memory fails me…
We re-fi’d a jumbo 30-year fixed last November at 3.625%, zero points. While we probably got a good deal, according to the Freddie Mac website, the average overall rate at that time was 3.35%, 0.7 points.
We did a refi in early 2012 at 4% and no points. Just completed a mod of that loan bringing the rate to 3.25% in exchange for $3k in fees. Got in just before the rates took off and it saves us around $400 per month.
So whats the point here..that interest rate rises may have less impact in SF due to more jumbo loans than most places..?
Interesting though, as SF certasinly appears to have both more a) all cash sales and b)big, jumbo mortgages than elswewhere, which would seem that the impact of comforming rate increases could be over stated
(caveat : yes, I’ve already heard the increased oppurtunity cost on deposit argument re cash sales!)
Jumbo rates have also risen by about a point in the last couple months. The rise in mortgage rates (likely back up after today’s slaughter in the bond market) is not going to crash the housing market, but it will dampen it significantly, in SF as everywhere else following the same trend.
It is pretty interesting that the spread among conforming, super-conforming, and jumbo rates has narrowed with the overall rise. But it does make some sense as jumbo loans require higher down payments and stronger creditworthiness. The securitization market for jumbo loans is also back (we do a lot of this work and it picked up a ton in the last year), so you no longer see the higher spread due to the need for the jumbo lenders to hold onto the loans.
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