If you are planning to borrow $417,000 or more to buy a home, try to wait for a while. Such loans are expensive now but rates may come down.
Mortgage delinquencies have picked up recently so investors are leery of mortgage loans. "Jumbo loans"–those for over $417,000–are not guaranteed while smaller loans may have some guarantees. Therefore, investors are focusing on mortgage-backed securities with guarantees.
With less investor demand for securities backed by jumbo mortgage loans, lenders are charging higher rates for such loans.
The higher the rates paid by borrowers, the higher the yields that can be passed through to investors in jumbo-mortgage-backed securities.
Recently, jumbo mortgage rates averaged 7.38 percent, for 30-year fixed-rate loans, while smaller loans averaged only 6.5 percent. If possible, try to delay making commitments for jumbo loans now. Rates may come down, when investors realize that these loans are not subject to worrisome default risk.
