Jumbo mortgage rates this week remain stable despite legislative attempts to increase the higher limit of jumbo mortgages that the United States government can purchase or guarantee. Jumbo loan rates on 30-year mortgage products averaged 4.59 percent, slightly higher than last week, but still under the 5 percent threshold. Jumbo mortgage rates for 15-year home loans are sharply lower at 3.76 percent down from almost 4 percent last week.

The loan limits put in place by the federal housing agencies on October 1, 2011 are having a negative effect on sales of luxury homes. The National Association of Realtors has released the results of a survey taken among its members regarding the change in maximum loan limits. Several real estate agents have stated that while the current jumbo loan rates may seem favorable, many luxury house hunters are being turned down by mortgage lenders due to the reduced loan limits. Some are forced to come up with a higher down payment, while others have to bring more cash to the closing table in order to lower the loan amount.

Sixteen percent of the 1,300 real estate brokers interviewed stated that their prospects had given up looking for a luxury home altogether since October 1. The mortgage loans now being purchased by Fannie Mae and Freddie Mac must have a principal amount of $625,000 or less. The Federal Housing Administration (FHA) will not consider guaranteeing a home mortgage higher than $625,000. Prior to October 2011, the maximum loan limit guaranteed by the federal housing agencies had been $729,750.

Senator Bob Menendez (D., N.J.)is one of the sponsors on a legislative amendment that will once again raise the maximum loan limits. In comments to the press, the democratic senator from New Jersey stated that the lower loan limits only help to make “A weak housing market even weaker.” Senator Johnny Isakson (R., Ga.) is the other sponsor on the bill which aims to return loan limits to the $729,750 levels established before October.

The amendment sought by Senators Menendez and Isakson is a reflection of the dichotomy faced by the White House and the Congress regarding the level of government involvement in the housing market. The government already holds guarantees in about 90 percent of the national mortgage market, and may wish to curtail their participation in order to lower their risk exposure. On the other hand, the government is desperately looking for ways to boost the languishing U.S. economy, and to that extent they are willing to support the embattled housing market as much as possible.

It remains to be seen whether an amendment to the maximum loan limits will have an effect on jumbo mortgage rates at all.