The chief benefit of the higher loan limits is expected to be lower interest rates on loans that were classified as jumbo mortgages, according to Dr. Tracey Seslen, an assistant professor at the University of Southern California Lusk Center for Real Estate in Los Angeles. Lower interest rates would "make borrowing cheaper for people who have been stuck in jumbo loans (and would) be a very positive thing," Seslen says.
Lower interest rates on bigger mortgages could make housing more affordable in high-cost housing markets and that could spur more sellers to put their homes on the market and entice more buyers to purchase those homes in those areas, Seslen suggests. "If people see an opportunity in the form of cheaper borrowing, that could be the tipping point that gets a lot of people back into the market," she says.
March 6, 2008