As the top chart shows, 30-year fixed rate jumbo mortgage rates are going for a post-crisis low, a rate not seen since 2005. With a few scattered exceptions, the rate you get today is about as low as it has ever been in history. Conforming rates are still very close to all-time lows.

As the second chart shows, the Federal Reserve has put on the books about $1.25T of mortgage securities(tan section) which completes the program as announced. Anything could change as the conforming mortgage market tries to stand on its own. If rates skyrocket(unlikely) expect FED action as a stable housing market is a distinct policy of the Obama Administration and the too big to fail banks. The TBTF are sitting on north of 4m homes that they will need to short sale or foreclose on this year per various estimates being thrown around the industry.

The fundamentals driving the jumbo mortgage rates (i.e., 10-year Treasury yields and the spread between MBS and Treasury yields that investors demand in order to compensate them for the prepayment risk of mortgage-backed securities) suggest that we are very unlikely to see rates go lower than they are now. Treasury yields are quite low from a historical perspective, and spreads are about as tight as they have ever been.

One other interesting fact that shows up in the first chart is that the difference between jumbo and conforming mortgage rates is still quite large given that a conforming 30Y fixed is at 4.75% currently. That means that even if conforming rates move higher, it will likely take awhile before jumbo rates move much higher; the spread between them could compress by another 25-50 bps for the absolute Super Prime Credits with 30-40% equity and substantial investment assets. aka Money Good Credits.

However, I should also point out that the declining spread between jumbo and conforming loan rates is a very good sign that private capital is returning to the jumbo mortgage market in general. The Fed is only buying conforming mortgages, not jumbos, so jumbos have been outperforming conforming MBS, which in turn suggests that private capital has been actively seeking out the higher yields on jumbos. That is also an indication that when the Fed stops buying MBS at the end of March, there is no reason to expect jumbo mortgage rates to move significantly higher. A lot of pressure is building because of the RECORD default rate of 9.6% which prevents investors such as pension funds, insurance companies and mutual funds from aggressively buying jumbo mortgage bonds. These twin forces lead us to believe we will see rates in the 5.75-6.50% range on the 30Y Fixed Jumbo Loan throughout the year.

We continue to believe that prospective homebuyers and most long term homeowners would be well-served to choose a 30-year fixed jumbo mortgage instead of an adjustable rate. But, one size fits all advice never works as you well know.  Fixed rates are very low from a historical perspective, while the short-term rates that drive ARMs are very likely to rise significantly in coming years. With the fixed rate you get the certainty of locking in a historically low jumbo loan rate, but with adjustable rates you are exposed to considerable uncertainty down the road, because no one knows today how high short-term rates will be in the future. We always advise matching the loan term with personal and financial plans.

Have a prosperous day.

Jumbo Mortgage Rates are Excellent

True jumbo mortgages, above the conforming jumbo loan limit, are offered by few lenders but are indeed available and at very good rates. Ditech mortgage for instance is offering jumbo mortgage rates as low as 4.375 percent on a 5/1 ARM. Wells Fargo offers jumbo mortgage rates of 5.75 percent 30-years fixed and 5 percent on a 5/1 ARM. These available jumbo mortgage rates show jumbo mortgage rates are better than ever. The trend recently has been for large lenders to aggressively advertise for jumbo mortgages so obviously it must be profitable for them to do so. With home values stabilizing the jumbo loan market should get less risky for banks by the month.

Jumbo Mortgage Rates are Good but what about an Approval?

Jumbo mortgage loans are tough to qualify for nowadays, that's no secret. Typically lenders want at least 20 percent equity in the home, full income documentation, assets showing reserves, excellent credit and more. If you do qualify it may save you a lot of money through a mortgage refinance. If you're looking to buy a home with a jumbo mortgage you'll most likely need a very large downpayment. If you've got the cash to do so a 5/1 ARM could give you a historically low affordable payment per the loan amount.

5/1 ARM Jumbo Mortgage Rates are Very Good

The best option in today’s jumbo mortgage market may be the 5/1 ARM. Believe it or not we found multiple lender’s including DiTech and GMAC offering the jumbo 5/1 ARM just under 4 percent. The index the jumbo 5/1 ARM’s adjustable rate follows after the 5 year fixed interest rate period is the LIBOR index. We advise anyone considering a jumbo 5/1 ARM to take a good look at the LIBOR index, it’s history and analysis of it’s future. Especially if there’s a strong possibility you’ll still be in the loan after the 5 year fixed rate period. That being said we do not recommend, especially on larger loan amounts, a 5 year adjustable rate mortgage for anybody who is going to be in a home for more than 5 years.

Current Jumbo Conforming Mortgage Rates

Current jumbo conforming mortgage rates are averaging about a 1/4 percent higher than normal conforming mortgages. Due to the extremely strict underwriting on the higher loan amounts, insured by Fannie and Freddie, we recommend getting a custom rate quote. There’s lots of modifications to points, fees, and rates based on the risk factors involved with each mortgage. Most of the time lenders are requiring FICO scores in the 700′s and at 30 percent equity.

So for in 2009 the the mortgage industry has seen it’s lowest interest rates in 50 years. The government has given unprecedented tax credits up to eight thousand dollars just to buy.

Refinancing is showing signs of life with long term mortgage rates in the 4.5% range. Refinancing a loan over $417,000 though may not be so easy. Jumbo mortgages are loans go beyond the limits of conforming loans which are backed by Fannie Mae and Freddie Mac. The maximum loan size is $417,000 for a single family residence which is quite often below the median loan amount in most areas especially in California. The conforming jumbo was created to address this issue and goes up to about $729,000 in some high cost counties.

Before the housing market collapse the difference between jumbo mortgage rates and conforming mortgage rates was as low as .25%. Today, the difference is tremendous and almost 2 1/2 percentage points. Without the good old portfolio lenders like World Savings jumbo loan availability has dwindled as the risk involved dries the ink out of the underwriter’s approval stamps. Jumbo mortgage loans were already consisdered high risk previous to the market collapsing. Today this risk is reflected with higher interest rates. Even though banks are gaining cash from scared investors who put their cash into FDIC insured savings accounts credit remains super tight. The rise in refinance applications on conforming mortgages is just another result of lower interest rates and we can only hope that soon the government takes bold moves to lower the rates and increase the available credit on the once prosperous jumbo loans.