About 10% of the outstanding jumbo loans have an interest rate at or above 6%
According to an analysis of CoreLogic data, jumbo mortgage originations experienced a noticeable decline in both dollar amounts and market share in 2023 and 2024 compared with previous years. The combination of elevated interest rates and consistently high home prices over the past two years likely contributed to the decrease in mortgage origination activity.
Origination volumes for both conforming and jumbo loans have fluctuated over time. Figure 1 illustrates that these volumes, including both purchase and refinance loans, peaked in 2021. As interest rates increased in 2022, origination volumes dropped. From their peak in 2021 to 2023, conforming loan volumes fell by 67%, while jumbo loan volumes declined by 61%.
Conforming and Jumbo Markets Origination Volumes (in $ Billions)
From January to July of each year, the jumbo loan origination volume in 2024 fell by 2% from 2023 and 56% from 2022. This is the lowest level since 2014 (Figure 1b).
The rapid home price appreciation along with historically low mortgage rates led to increased mortgage origination volumes in 2020 and 2021. In 2021, the average interest rate for 30-year, fixed-rate conforming mortgages was 2.96%, marking an all-time low annual average. However, interest rates began to climb, hitting a 19-year peak at an average of 7.6% in October 2023. By September 2024, the average interest rate for 30-year, fixed-rate mortgages had decreased to 6.08%.
A closer look at CoreLogic data reveals that the jumbo mortgage market contracted during the early months of the pandemic for both purchase and refinance loans. Figure 2 shows jumbo loan originations as a share of all conventional (non-FHA/VA/RHS) mortgages by dollars originated. As a share of purchase loans, jumbo loans dropped by 7 percentage points over 12 months to 18% in May 2020 reaching the lowest market share since 2012. However, following that dip, jumbo purchase loans began to rebound. Conversely, jumbo refinance loans continued to decline, hitting their lowest point since 2011 at 14% of total mortgages in October 2020.
Jumbo Market Share of Conventional Purchase and Refinance Mortgages (by Dollars Originated)
Over the course of 2021, both purchase and refinance jumbo mortgages began to rise as the economy recovered. However, as interest rates started to rise slowly and with the double-digit home price appreciation, the share of jumbo purchase loans started to decline in December 2021 and was 21% of total purchase mortgages in July 2024. Conversely, jumbo refinance loans surged until December 2022 but then declined. Now, their share has returned to pre-pandemic levels.
About 10% of Outstanding Jumbo Loans Have an Interest Rate at or Above 6%
With falling interest rates following the last Federal Reserve meeting, mortgage refinance activity is expected to increase. As of July 2024, most jumbo loans are secured at ultralow or low rates, with three-quarters having interest rates below 4%. Just about 10% of current jumbo loans carry an interest rate of 6% or higher. These loans were mostly originated in 2023 and 2024 and could benefit from refinancing if rates fall below 6%.
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