Spread between Jumbo and Conforming Rates

Posted by Steve Dalton / Category:

Last year when the "sub prime" problem became a national reality, I mentioned in a few places that one problem was pricing that didn't reflect the true underlying risk. I would suggest we should still have sub-prime loans, who's to say that a willing lender and borrower can't strike a deal? But, the price needs to reflect the true and liquid risk of the loan.

Calculated Risk, a rather negative toned economic blog, shows that the current gap in pricing is now roughly 3% when moving from a conforming loan to a jumbo loan. Is the risk on a higher priced house actually that much higher? Or, as a positive look, is the affordable range of homes becoming a much healthier niche in the market ... while higher priced homes are still a bit sluggish.

Here's my worry, with all the credit markets jitters, will affordable homes also get penalized and rates rise to 9%? I hope not, but because we're in new territory, I'd highly suggest you refinance or purchase now and not wait.

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