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Little Relief for Jumbo Mortgage Rates

[Dec 26, 2008.]

 

Although mortgage rates have declined in recent weeks, borrowers in expensive regions like San Francisco and New York don't appear to be benefitting much.

Data from BanxQuote, a financial data firm, showed that the average 30-year fixed rate for a jumbo mortgage above $729,750 was almost 2 percentage points higher than the typical loan rate. Earlier this week, jumbo mortgage rates averaged 7.32% for a 30-year loan versus 5.38% for a conforming loan.

If lower mortgage rates encourage borrowers to refinance their homes or purchase new homes with conforming loans, jumbo rates could eventually begin to fall. Keith Gumbinger, vice president of mortgage-research firm HSH Associates Inc. in Pompton Plains, N.J., told Bloomberg that:

A guy in a low-cost market like Des Moines probably doesn’t care much about helping someone in New York buy a million-dollar apartment, but if he refinances his conventional loan, that’s exactly what he’ll be doing. He’ll be giving lenders the liquidity they need to rebalance their loan portfolios and compete for jumbo borrowers who typically are the best in terms of credit quality.

In the meantime mortgage applications increased 48% last week as people looked for refinancing deals. Some homeowners hope to take advantage of the falling mortgage rates to lower their housing expenses.

Other are looking to purchase a home, but many people still have a wait-and-see attitude as they hold out for housing values to end their freefall. The median home price fell 13% in November from a year earlier, according to the National Association of Realtors (NAR).

Charles McMillan, president of NAR, said in a statement that a housing stimulus package is needed to spur an economic recovery. He said in a statement:
We need more than low interest rates to encourage enough buyers to enter the market and meaningfully draw down inventory, which would stabilize home prices—that, in turn, would help the economy to recover. We should extend the first-time buyer tax credit to all homebuyers and eliminate the repayment feature, and make permanent the higher loan limits that are vital in high-cost markets—the faster we do this, the faster housing and the economy can recover.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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