Interest Rates Rise on Jumbo Loans

Luxury-home buyers are facing higher interest rates for jumbo mortgages as the economy improves and the job market strengthens. The average interest rate rose to 3.99% on 30-year, fixed-rate jumbo loans with balances greater than $417,000, according to weekly mortgage rate data from the Mortgage Bankers Association. Rates for jumbos are at their highest level since March 2015 and are up from 3.91% recorded in last week’s MBA weekly mortgage applications survey. The latest survey is for the week ending May 8. Points increased to 0.33 from 0.24, including the origination fee, for 80% loan-to-value mortgages. A selloff in bonds in Europe created a ripple effect of mortgage rates rising in the U.S., according to Bankrate.com. Peter Grabel, managing director and loan originator at Luxury Mortgage Corp. in Stamford, Conn., said the rise in mortgage rates caught him and some of his clients by surprise, but it isn’t stopping his customers from buying luxury real estate. “Most of my clients are buying, not refinancing, and whether they are at 3½ or 3.75% doesn’t impact their ability to buy or their decision to buy,” he said. “We see a lot of people choosing products other than a 30-year fixed rate mortgage. I’m personally doing a lot of loans closer to 3% that are based on a 15-year [adjustable-rate mortgage] or a 10-year ARM.” Despite the latest rise, mortgage interest rates are still near historical lows, and nowhere near the double-digits they’ve reached in the past. “If you keep it in perspective, 4% is a pretty low rate to lock in for 30 years,” Grabel said. “But if you have it under a microscope and you see it’s gone up a quarter point, you are disappointed, but big picture, it is still a pretty nice rate to borrow at.” Mortgage rates are expected to rise overall this year and next, as the U.S. economy grows and the job market remains strong, says Joel Kan, associate vice president of industry surveys and forecasting for the MBA.