Real Estate Trends… Mortgage Rates Shift to the Wealthy
A recent Associated Press article reports that for three decades the U.S. middle class enjoyed a rare financial advantage over the wealthy – namely, lower mortgage rates. Now even that perk is fading away. Most ordinary homebuyers are paying the same or higher rates than the fortunate few who can afford much more. This trend reflects the ever-widening wealth gap between the richest Americans and everyone else.
Two factors have caused the spread between conventional and jumbo rates to disappear:
- Bankers say they have begun using mortgage rates to woo high net worth clients. Attractive rates on jumbo mortgages have become a way to secure additional business from these clients – from managing their investments to offering a broad range of financial services.
- In 2012 the government began raising the fees it charges lenders for guaranteeing payments on conventional mortgages. Lenders passed along that increase to borrowers in the form of higher rates. The fees are meant to stop home buyers from once again borrowing more than they can afford – a trend that fueled the 2007 housing bust.