Average Interest Rate On Jumbo Mortgages For 30-Year Fixed Loan Hits 7 Percent

January 5, 2009 10:47 a.m. EST

Washington, D.C. (AHN) - Higher interest rate on housing loans beyond $625,000 at 7 percent is hampering the refinancing of jumbo mortgages. Lending rates on 30-year fixed loans has climbed up, while interest for smaller loans has even gone down to 5.28 percent this week.

Larry Pratt, chief executive of First Saving Mortgage, explained the high interest rate for jumbo loans to lack of supply because the mortgage crisis led Fannie Mae and Freddie Mac to concentrate on smaller loans. With the economic stimulus package, the two were permitted by the federal government to hike the limit for loans from $417,000 to $729,750. However, with the end of 2008, the new limit expired and put in place a lower ceiling of $625,500.

The situation created a third middle tier interest rate for loans between $417,000 to $625,500 at 5.56 percent.

Hardest hit by the higher cost of jumbo loans were residents in areas which pricier homes such as Washington where 20 percent of outstanding mortgages are over $417,000.

To remedy the situation, the National Association of Realtors called on the Federal Reserve Bank to buy also large numbers of jumbo loans to bring down interest rates for this type of loan.