By Nick Timiraos | The Wall Street Journal
Interest rates on mortgages for pricey homes have dropped below those on smaller mortgages, an event that lending executives say has never happened before.
Borrowing rates for so-called jumbo mortgages, which are too big for government backing, historically have been set higher than rates on what are known as conforming loans, which are backed by Fannie Mae, FNMA +1.60% Freddie Mac FMCC +1.77% or government agencies.
But in the past two weeks, the relationship has flipped, a combination of interest-rate volatility, government policy and banks flush with cash that are enjoying lower funding costs, making jumbo mortgages an attractive investment for them.
The average 30-year fixed-rate conforming mortgage was at 4.73% last week, according the Mortgage Bankers Association, compared with 4.71% for the average jumbo 30-year fixed-rate mortgage.
