The number of mortgages over $10 million has surged in the last three years, according to a Mansion Global analysis.
There were 118 mortgage applications for at least $10 million nationwide in 2014 and 2015 combined – 60 for 2014 and 58 for 2015 — according to data gathered as a result of the Home Mortgage Disclosure Act. The 1975 law requires financial institutions to make their mortgage data public.
The number of $10 million-plus mortgages has bounced back since the financial crisis, when it was as low as 15 in 2009.
Although the data is not yet available for 2016, it seems that the upswing has marched into this year driven by the lower long-term rates, according to Elizabeth Carasaniti Cino, director and residential real estate sales executive for Bank of America’s Global Wealth and Investment Management division, which oversees client balances of $2.5 trillion.
“It is definitely a robust year,” she said. “We have a lot more of these today than ever seen before.”
Citi Private Bank, CitiGroup’s subsidiary that exclusively serves clients with over $25 million net worth, has seen a general 15% increase of business compared with last year, said Michael McPartland, the company’s managing director and head of residential real estate for North America.
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It appears to be an indicator of the robust recovery of the richest buyers’ purchasing interest and financial activity.
The 30-year and 10-year fixed mortgage rates have been dropping throughout most of the year, especially around the end of first quarter and early second quarter. Generally rates don’t rise because of the size of the loan. The fact that one can get a $10 million mortgage for around 3% rate is certainly very attractive for the ultra-wealthy customers, some of whom stand to make a 20% profit by investing their money elsewhere, said Ms. Carasaniti Cino. In other words, they can take advantage of low interest rates while simultaneously investing the money they could have used for a cash purchase for a high return.
Emmanuel Vuillequez, senior vice president with Wells Fargo Home Mortgage, told Mansion Global in an email that they’ve seen the spread narrow in most recent years between interest rates on conforming and non-conforming loans.
Loans that are $10 million-plus fall into the non-conforming category because they exceed the size limit of between $417,000 to $801,950 depending on the number of units of the house. Non-conforming loans usually have higher rates than conforming loans for their higher risk.
Mr. Vuillequez said more high-end buyers are capitalizing on low rates, which are independent of loans being conforming or non-conforming. “We saw a trend in 2015 of jumbo customers refinancing to fixed-rate loans, taking advantage of historically low interest rates,” Mr, Vuillequez wrote in an email.
Since Donald Trump’s election victory, mortgage rates have risen nationwide. As of Wednesday afternoon, the rates on 30-year fixed-rate conforming mortgages hit the highest since July 2015 at 4.23%.
The recovery of the real estate market also motivated investors to be more proactive with their property moves. “Pockets of the country have rebounded particularly with higher value, almost back to the pre-crisis level. California, for example, both north and south, is very strong,” Ms. Carasaniti Cino said.
Most $10 million-plus mortgage applications in 2014-2015 were in top housing markets like New York, Los Angeles and West Palm Beach, Florida. The New York metropolitan area, for example, accounted for 35% with 41 applications over the two years. For privacy reasons, the data did not include property addresses, but Mansion Global found out that in 2015, the highest mortgage was $73 million, taken out in Orange County, California.
Disclaimer: This analysis only includes conventional mortgages for purchasing one-to-four-family, owner-occupied dwellings. Mortgages for manufactured homes, multi-family dwellings and home improvement were not included.
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