4.25% 30 Year Fixed Rate
Loan Amount
Loan Type

Program Rate APR
30-Yr fixed 4.750 % 0.7 to 1
15-Yr fixed 3.750 % 0.7 to 1
5/1 ARM 3.125 % 0.7 to 1
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The Woeful Jumbo Mortgage Market

The jumbo mortgage market is more vulnerable to sudden price movements, whether up or down. Jumbo mortgages are most often used to purchase luxury homes, which are very sensitive to recessions and depressions. Jumbo mortgage rates reflect these sensitivities by increasing or decreasing the spread between jumbo rates and conforming rates. “Conforming” refers to the fact that Fannie Mae and Freddie Mac will only purchase loans with a face amount equal to or less than their conforming limit. Jumbo mortgage rates have a built-in premium in this regard; they are always a little higher than conforming rates.

The previous week saw plenty of buying and selling action in the 30-year fixed-rate jumbo rate. The final result was to end the week exactly where it began: at 4.31 percent. Hitting a high of 4.38 percent, it then fell by 0.07 percent back to 4.13 on October 17, 2011. The 30-year fixed-rate conforming rate started at 4.09 percent and ended at 4.13 percent, indicating a narrowing spread between jumbo and conforming loans. To be precise, the spread on October 7 was 0.22 percent or 22 basis points. By October 17, the cumulative action in the 30-year conforming rate had narrowed the spread to 0.18 percent or 18 basis points, a drop of 0.04 percent or four basis points.

The spread serves as an economic indicator in rough times. In 2008, at the height of the property crisis, the spread widened to its highest on record, over 1.5 percent or 150 basis points. Through 2009, 2010 and 2011, the spread narrowed back down to its historical range of between 0.25 and 0.75 percent or between 25 and 75 basis points. The extraordinary actions by the Federal Reserve as part of its zero interest rate policy (ZIRP) has forced jumbo loan rates below this historical range. Within the last month, the lowest rate achieved by the 30-year jumbo loan was 4.11 percent.

Predicting future trends in this market is dependent on what government bond yields are doing. The 10-year Treasury note, in particular, is used as a benchmark. The yield on the 10-year note ended the week lower than it began, putting downward pressure on rates throughout the mortgage market. It is hard, if not impossible, to say where jumbo loan rates will fall to with any precision. They have come off of their record lows.