As a sign that some normalcy is returning to mortgage markets, the premium attached to jumbo mortgage rates is getting smaller.
A “jumbo”-sized loan is one that exceeds $417,000 on a single-family residence, among other criteria.
Conforming 30-year fixed rate mortgages and jumbo 30-year fixed rate mortgages tend to move in the same direction over time. You can see that illustrated on the left-side of the graph.
But, as we move towards the right, we can see how, beginning in mid-August of this year, the general direction of mortgage rates for these two products diverged.
In mid-August, you’ll remember, is approximately when the bottom fell out of the credit risk markets.
Since late-September, though, jumbo loan risk appears to be declining. The chart above from Bankrate.com shows that while conforming rates have remained relatively flat, jumbo mortgage rates have dropped by about 0.125%.
In mortgage markets, the credit pendulum tends to swing too far in both directions. Getting approved for a home loan may have been too easy last year, and it may have been too tight last month.
Today, though, the pendulum appears to be moving towards the middle once again.
NOTE: Bankrate.com publishes rates based on advertising, and not market conditions so the chart does not reflect actual mortgage rates. It does reflect a trend, however. The chart is meant to show how jumbo, 30-year fixed loans are moving lower with respect to conforming, 30-year fixed rate home loans.