Rates for higher loan amounts have dropped below conventional loans, according to the Wall Street Journal.
Jumbo mortgages, which are too big for government backing have historically been set higher, but this has changed for the first time, according to some executives. This comes as a result of interest rate volatility, government policy and banks flush with cash and needing to put it to work.
“In my 30-year career, I’ve never seen nonconforming loans priced below conforming loans,” said Brad Blackwell, executive vice president of Wells Fargo during an interview with the WSJ.
Jumbo borrowers are in high demand from traditional banks because they typically have more assets to invest. Banks use their relationship with better-off clients to sell them other products, such as brokerage accounts and credit cards.
“These are superpremium borrowers. They represent great cross-sell opportunities,” said Keith Gumbinger, vice president of HSH.com.
But recent interest-rate turmoil is making it easier for large banks such as Wells Fargo & Co. and J.P. Morgan Chase & Co. to woo those borrowers.
“We’re in a world where their cost of funds is still very, very low,” said Bob Walters, chief economist at Quicken Loans.
Written by John Yedinak