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Banks Ease Purse Strings On Luxury Home Loans
Originally published on Wed October 16, 2013 5:58 am
RENEE MONTAGNE, HOST:
And for the first time in decades, interest rates for loans on jumbo homes are lower than rates for a typical mortgage. And because of that, the luxury market is the fastest growing home loans sector.
From member station KJZZ in Phoenix, Peter O'Dowd reports.
PETER O'DOWD, BYLINE: Sales of homes costing over half million dollars in the Phoenix market are up 64 percent compared to last year around this time. Mike Metz says demand is up because it's easier to get a so-called jumbo loan. He works for the mortgage lender Guaranteed Rate.
MIKE METZ: For the first time in my 25-year career, I've seen jumbo rates dip below the conforming 30-year fixed rate.
O'DOWD: Now that's odd, because historically conforming loans - ones below $417,000 - had been a much better deal. These days, fees tacked on by Fannie Mae and Freddie Mac have made those smaller loans less attractive.
Mike Fratantoni of the Mortgage Bankers Association says another reason big loans are getting more competitive is that banks have a lot of cash. They want to lend it to people with good credit.
MIKE FRATANTONI: These tend to be borrowers with higher income, more stable employment. A lot of aspects make those loans very attractive so there's been a bidding war to get those jumbo loans.
O'DOWD: Fratantoni says nationally jumbo loans make up a sliver of the market but represent the industry's fastest-growing sector. In turn, private investors are starting to buy these loans from the banks.
FRATANTONI: It just adds to the banks' desire to do more of these loans.
O'DOWD: Of course, doing more with these loans - securitizing them - is what brought the country to its knees during the housing crisis.
For NPR News, I'm Peter O'Dowd in Phoenix. Transcript provided by NPR, Copyright NPR.