30 year Fixed Jumbo Mortgage Rates Chart30-Year Fixed Jumbo Mortgage Rates Table
The top chart shows that 30-year fixed-rate jumbo mortgage rates will be cut to a low after the economic downturn that has not been reached since 2005. Except for a few dispersed issues, the rates you get today are about as low as never before in our entire story. Conformity rates are still very near historical highs.
The second chart shows that the fundamental data that drives these interest rates (i.e. 10-year Treasury returns and the difference between MBS and Treasury returns required by the investor to offset the advance payment risks of mortgage-backed securities) suggests that we hardly expect interest rates to be lower than they are today.
The Treasury returns are historically quite low and credit spreads are about as narrow as never before. Another interesting fact shown in the first chart is that the gap between jumbo and compliant mortgage rates is still quite large. This means that even if the conformal rates move higher, it will probably take a while for the jumbo rates to get higher; the gap between them could be compressed by another 25-50ps.
But I would also like to point out that the falling difference between jumbo and compliant lending rates is a very good indication that personal money is coming back into the mortgage markets. Since the Fed only buys compliant mortgage, not jumbo, jumbo has outperformed compliant MBS, suggesting that retail investors have been active in looking for higher returns on jumbo.
This is also an indicator that if the Fed ceases to buy MBS at the end of March, there is no need to anticipate significantly higher mortgage rates. Myself, I go on to believe that future home buyers would be well serviced to opt for a 30-year fixed-rate mortgage instead of a variable one.
The fixed interest rates are very low historic, while the short-term interest rates that propel DRMs are very likely to increase significantly in the years ahead. The fixed interest gives you the assurance that you are keeping a historic low interest but with the variable interest you are still facing significant uncertainties as no one today knows how high short-term interest rates will be in the near term.