Large mortgages drive growth of jumbo loan market

The price of luxury homes has gone up over the last year.

The Mortgage Bankers Association (MBA) has revealed that home loans worth between $1 million and $5 million were the fastest-growing part of the U.S. jumbo loan market in January. Jumbo mortgages are issued to borrowers with high credit ratings at values above what is typically considered a conforming loan. The threshold is $417,000 in most parts of the country.

According to Bloomberg, lenders are more willing to issue jumbo home loans in recent times because luxury home prices are up, and also to make up for what is still slow growth in the general housing market. As this blog reported last week, many first-time homebuyers are finding it difficult to obtain loans amid strict lending standards.

On the other hand, the nation's improving economy and surging stock market are helping more buyers afford large mortgages, according to National Association of Realtors chief economist Lawrence Yun. According to the MBA, jumbo mortgages were up 16 percent last month over January 2014, and Yun expects the number to grow at least 10 percent over the course of this year.

"We've seen strong appreciation in most of the coastal markets," Wells Fargo portfolio business manager Brad Blackwell told Bloomberg. "The price rise will move more homes into the category that would need a larger loan. What jumbo lending does for us is attract really high quality customers with high quality assets we can put on our balance sheet."

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