One of the features of this blog will be to give a weekly update on what is happening with the mortgage market and how the news and technical factors affect mortgage interest rates. Let me say right up front that I am not an economist, and I am not an expert on the financial markets. What I am is an Illinois mortgage guy who follows the markets closely. I’ve been around long enough to form some opinions and these are my opinions.

This was a wild week if you follow mortgage interest rates. The week started out with the stock market in a funk and mortgage rates dropping below 6% to their lowest levels in over two years. The phones were ringing and champagne corks were flying in mortgage offices all over the country. The week ended with rates jumping back up and the mortgage euphoria fading.

The big news this week was the sub-prime bail out plan put forward by the Bush  administration. This plan called for a freeze on the interest rates for some borrowers in order to keep them out of foreclosure. The administration claims that this plan will help up to 1 million homeowners. I’ve seen other estimates claiming the numbers will be under 300,000. Either way this is a step in the right direction if it helps some people keep their homes and continue paying on their loans. But in my opinion this is a drop in the bucket, a band aid on a bullet wound. It won’t make enough of a dent to change anything, and we will need more fixes later on.

That is my opinion. The stock market disagreed with me. Based on where investors bet their money, they expect the credit crunch to be over in short order. When the bail out plan was announced on Thursday the stock market took off like a rocket and mortgage bonds tanked. This morning mortgage bonds losses deepened after the jobs report came out showing slightly higher job creation than the low level that was forecast. Mortgage bonds started the day bad, and it got worse from there.

Next week the Fed meets on the 11th. It is expected that they will lower rates, it is unclear by how much. Expect more roller coaster action to continue. 

Here is what rates look like at the end of today for an A+ borrower on a 30 day rate lock with 0 points  (Keep in mind there are dozens of factors which effect mortgage rates and you ability to be approved for a loan. These include your credit score, the loan to value, the loan amount, your documentation type and on and on. This is meant more as a gauge of where we are from week to week. Give me a call and I’ll be happy to give you a quote for your personal situation):

Conventional loans up to $417,000 

30 year fixed rate    6.125%    6.183% APR

15 year fixed rate    5.625%    5.705% APR

5-1 A.R.M.               5.875%    6.483% APR

For Jumbo loans over $417,000

30 year fixed rate    6.875%    6.904% APR

7-1 A.R.M.               6.375%    6.591% APR

FHA LOANS up to $270,200 with 1 point origination fee

30 year fixed rate    5.875%    6.094% APR

These are only a few of the hundreds of programs available. Rates change regularly. On a day like this the rate quoted in the morning may not be there by the afternoon. This is one of the reasons I recommend locking in your interest rates.

This is how mortgage bonds have performed over the last month.

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