Banks courting high-end buyers with cheaper jumbo mortgages

While rates for conventional mortgages saw their greatest spike in two decades last month, financing costs for high-end homes are becoming a relative bargain, as banks such as Wells Fargo and JPMorgan Chase offer jumbo mortgages at low rates to nab high-end clients, Bloomberg News reported.

The extra cost of 30-year fixed jumbo loans reached a six-year low of 0.16 percentage point last month, according to data from reviewed by Bloomberg News. Bigger adjustable-rate mortgages with payments that can rise after five years ended last week 0.09 percentage point cheaper.

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“Lately, our jumbos are either in line with conforming or better,” Karen Mayfield, the mortgage banking national sales manager at San Francisco-based Bank of the West, told Bloomberg News.

Jumbo loans – which are loans larger than those allowed in government-supported programs (up to $729,750 for single-family properties in high-cost areas such as New York) – are getting relatively cheaper because they remain on the bank’s book, as opposed to being spun off into mortgage-backed securities, Paul Miller, a capital markets analyst, told Bloomberg News.

“The banks are awash in liquidity, and they are looking for ways to make good loans,” David Hilder, an analyst at New York-based Drexel Hamilton, told Bloomberg News. [Bloomberg News] Hiten Samtani