Illinois Mortgage Rates and News

Welcome to this week’s Illinois Mortgage Rates and News week in review, my take on the week’s financial news and how it affected Illinois mortgage rates.

Wow! It doesn’t seem all that long ago that mortgage rates were dropping and it looked like we were going to test the all time lows of a few years back. Actually, it wasn’t that long ago, though 3 weeks in this kind of market can feel like forever. Markets move on sentiment. When things are good they are unbelievably good, and the future couldn’t be rosier (Do you remember the term ‘irrational exuberance’?). On the other hand, when fear is in the air you better be careful or you’ll get trampled by the herd as they run toward the nearest cliff. That’s where we are now. Mortgage interest rates are getting down right ugly (comparatively, anyway). Fixed rate mortgages jumped to their highest point of the year this week.

So what happened to change market sentiment so sharply? Is the economy back, running at full steam again? Was all the talk of the coming recession nothing more than a bad dream? Are home buyers flooding the real estate market? The answers are – I don’t know, no, no and no. We still have the same issues to face that we did a few weeks ago. The economy isn’t on the verge of a roaring comeback, but mortgage bond traders are now looking past the recession, and seeing a future where inflation is raging. As I’ve written about before, bonds hate inflation. Inflation erodes the value of a bond or mortgage, paying their return back in cheaper dollars. So even a hint of inflation is a problem, and with the rate cuts the Fed has already made, along with future cuts it is prepared to make, and the money dump from the stimulus package, inflation down the road is a concern.

This creates a conundrum of sorts. In order to get the economy moving again, we need to stabilize the real estate market. Low mortgage rates would help, but the rate cuts are now looked at as inflationary, so mortgage rates rise, putting more of a crimp on the housing market and consumer sentiment. It will be interesting to see how this all is resolved. The one thing I do know is that we are still in a credit crunch, and market volatility is higher than ever. The trend now is for higher mortgage rates, but this could change quickly. All it might take is one bad economic report, some unexpected news or even a comment made by Fed Chairman Bernanke, and rates could be shooting back in the other direction.

All the data coming out this week showed more evidence of a slow economy. Industrial production was down and a measure of consumer confidence hit a 16 year low. Several big bond insurers moved one step closer to the crisis stage, needing more capitalization or they will be downgraded from investment status. The president signed the stimulus package into law so we will have checks on the way in the next few months. The Bush administration along with 6 of the major mortgage loan servicers announced a new program to help borrowers who are behind in their mortgages. Called Project Lifeline, it will give borrowers who are 90 days behind in their payments a 30 day break from the foreclosure process, giving them a chance to renegotiate new terms with their lender. Whether this is a real lifeline or not is open for question. The last bail out plan they announced to great fanfare went nowhere. This could be more of the same.

Fixed rate mortgages rates are higher this week than they were last week. But rates for adjustable rate mortgages have stayed the same or improved. The yield curve, the difference between short term rates and long term rates is suddenly huge. This means that for many people, adjustable rate loans may make sense. You are taking more of a risk if you go with an adjustable rate mortgage, but there are ARMs that stay fixed for up to 10 years, which is a long, long time. If you aren’t planning on being in your home that long, or even if you are, the difference between the 30 year fixed and the 10 year adjustable is a half a point – it’s worth a look.

Here is what Illinois mortgage rates look like today for an A+, full doc purchase on a 30 day rate lock, with 0 points, and no origination fee.  The conventional loans are based on the highest conforming loan amounts, which give the best pricing. (Again, there are many factors which affect mortgage rates and your ability to be approved for a loan. These rates may not fit your situation and this is just a sample of the programs that are out there. If you would like a quote for your personal situation, give me a call or contact me and I’ll take the time to find the rate and program that is best for you.) :

Conventional loans up to $417,000

30 year fixed rate    6.00%      6.174% APR

15 year fixed rate    5.50%      5. 642% APR

5-1 A.R.M.               5.00%      5.187% APR       

7-1 A.R.M.               5.25%      5.363% APR

10-1 A.R.M.             5.50%      5.642% APR

For Jumbo loans over $417,000

30 year fixed rate *  6.75%     6.849% APR

(*We have one lender at 6.125% - if you meet their guidelines.)

7-1 A.R.M.               5.75%     5.823% APR

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

30 year fixed rate    5.75%     5.928% APR

These are just a sampling of the mortgage rates available. We have special programs for first time home buyers and all the bond programs including the City of Chicago Bond program and the State of Illinois Bond program which offer no down payment and below market pricing.

Next week’s biggest report will be the Consumer Price Index (CPI), released on Wednesday. Inflation is the fear, so this will be watched closely. Housing Starts and the minutes from the last Fed meeting, two other potential market movers, will also be released on Wednesday. There are other reports due next week, and whichever way they turn out, I expect the market will be volatile. Let me know if I can help in any way.

llinois Mortgage Rates and News.

Peter Thompson is illinois Mortgage Broker



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