According to a recent Bloomberg article, the past several months have witnessed a major increase in “super-sized mortgages” that meet the borrowing needs of ultra-wealthy clients. Central banks have slashed already low interest rates to protect the economy from pandemic effects.
While delinquencies may be impacting ordinary homeowners, the money borrowed in the jumbo home loan size of $766,000 or higher has increased. The US Mortgage Bankers Association estimated that the year-on-year number of such loans rose by two-thirds in August 2020.
This money tends to be funneled back into the investment economy, either through equity positions or in new real estate acquisitions. One trend is urban dwellers seeking larger rural or suburban residences as they ride out the pandemic. Generally, however, the upper range of the mortgage market is focused on maximizing financial market returns. This, in turn, spurs new economic activity.
