Joe Wilson's Silicon Valley Real Estate Blog

Low interest rates are driving high-end home buyers to supersized mortgages at a pace unseen since the housing boom. But the deals may have a limited shelf-life. So-called jumbo loans—generally those bigger than $417,000—are a better bargain now than they have been in years. The average rate on a 30-year jumbo mortgage is 5.15%, down from 6.41% two years ago, according to mortgage data firm HSH Associates. That means the monthly payment on a 30-year $600,000 home loan is now about $3,280, some $480 less than the cost of the same loan two years ago, for an annual savings of nearly $5,800.

Not only are jumbo loans cheap relative to historical rates, they are cheap relative to smaller "conforming" loans, which are backed by Fannie Mae, Freddie Mac and federal agencies. The difference between the rates on a jumbo mortgage and a conforming loan is just 0.43 percentage point, the narrowest spread since 2007.

That makes borrowing bigger amounts more attractive than it has been in recent years, and also presents opportunities for buyers who might have been previously locked out of pricey markets due to higher rates, says Stuart Gabriel, director of the Ziman Center for Real Estate at the University of California, Los Angeles.

The number of jumbo loans issued in 2011 could be the highest in five years, when the housing market was near its peak. That is in part because people are trying to lock in a government-backed jumbo loan now ahead of a planned limit reduction this fall.