Banks are tapping the brakes on big home loans known as jumbo mortgages, which they have typically viewed as a low-risk way to attract wealthy customers. In the past year, the Federal Reserve’s steep interest-rate increases and a series of bank failures have dimmed their appetite. Now affluent home buyers are no longer getting the special treatment and preferential rates they hoped for.
Mortgage borrowers across the board are facing higher rates, and the average rate on a 30-year, fixed-rate mortgage shot above 7% last week. But rates are rising faster for jumbos, which are typically above $726,200.
Jumbos usually carry lower rates than regular-size mortgages, but that has reversed in recent months. The going rate on a jumbo was 7.44% on Friday, versus 7.20% for a typical smaller loan, according to mortgage-data and technology company Black Knight. The availability of jumbos has been falling for three straight months, the Mortgage Bankers Association said.