September 5th, 2007 11:54 AM
Direction of Mortgage Rates
If you only listen to what people are saying, or merely scan headlines these days, all things related to mortgage rates look pretty grim. Contrary to what the scare mongers are telling us, relief may soon be on the way. Whether or not the Fed decides to cut interest rates during their September 18th meeting (and they will cut, in my opinion), there should be some easing of rates in the jumbo loan markets ahead.
These jumbo rates, loans of more than $417,000, have been somewhat artificially high (1 1/2 points or more in most cases) since Wall Street investors stopped buying them as securitized packages in early August. Jumbo loan providers had to increase the rates to protect themselves until things in the markets calm down.
A current strategy for loans just a bit over jumbo, is to break it into two loans with a "conforming" first mortgage covering the amount up to $417,000, and a second mortgage (or a home equity line of credit) for the balance. This assures a good rate on the first and a workable second which could be rolled together into a future new loan once jumbo rates improve.