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.

The great physicist Isaac Newton described gravity by noting, what goes up, must come down. This week gravitational forces were at play in mortgage interest rates. After moving up strongly (and strangely) most of the month, mortgage rates are now falling like the proverbial apple. Mortgage rates jumped up based

on fear of inflation. The strange part of this has been that inflation may be a problem down the road, but the credit crunch and recession are crucial problems now. As Fed Chairman Bernanke said in congressional testimony this week, “You fight the enemy in front of you, not the one over the hill.” Inflation may become a problem, and there are signs of inflation especially in fuel and food costs, but it is harder to raise prices when the economy is slowing down. At any rate, between Bernanke’s testimony (the economy is soft and it could get softer) and some pessimistic economic reports, the focus is off of inflation and this means mortgage rates are heading back down.

New claims for unemployment insurance were up to 373,000. January durable goods orders tanked by 5.3%, much more than expected. Consumer confidence dropped 12 points, coming in at the lowest level in the last 16 years. Consumer confidence is a good indicator of future spending as consumers tighten up their wallets and only spend on necessities when times are tight. The stock market got killed this week, and that meant more money coming out of stocks and into the safety of bonds, including mortgage bonds.

In other mortgage news, The Office of Federal Housing Enterprise Oversight removed limits on the amount of loans Fannie Mae and Freddie Mac can buy.  This will allow them to sell and repackage more loans which adds liquidity to the housing market. As of tomorrow the FHA lending limits are due to increase. The limit will be based on 175% of the median home price for the area. Once it is official I’ll post the details, including the cap for the Chicago area. When I first got into the mortgage business 16 years ago, FHA was one of the few options available for new buyers or those without a big down payment. Over the years they became less and less of a factor. Part of it was their old fashioned guidelines; part of it was that too may first time home buyers bought homes above the FHA lending limit. They’ve already made some moves toward modernization with more on the way. This cap increase will help a lot of people get financing they couldn’t qualify for before.

Conventional wisdom now shows a 70% chance that the Fed will slash rates by another 75 basis points on or before the March 18 FOMC meeting. What does that mean if you are looking to buy a home or refinance your mortgage here in Illinois? Well, the last time the Fed made a big cut, mortgage rates tumbled – for about a day. Then they moved higher. I think there is a good chance that rates will be moving down some more, but once the Fed does its thing again, don’t be surprised if fixed mortgage rates get worse again. If you are thinking of refinancing your current mortgage, get your papers in to your loan officer (or give me a call) and be ready to move. Same thing if you have a contract to buy and are waiting to lock in. Rates are improving now, but there were a lot of people who got left behind while they waited for lower rates the last time. Volatility is still crazy and I expect it will remain that way.

Mortgages rates are much better this week than they were last week, and the trend is going in the right direction. 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    5.75%       5.823% APR

15 year fixed rate    5.125%     5. 248% APR

5-1 A.R.M.               4.875%     5.179% APR       

7-1 A.R.M.               5.125%     5.267% APR

For Jumbo loans over $417,000

30 year fixed rate*  6.75%       6.862% APR

(*We have one lender at 6.125% for a Jumbo fixed rate – if you meet their guidelines.)

7-1 A.R.M.              5.50%        5.639% APR

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

30 year fixed rate  5.50%        5.749% 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.

There are a lot of reports coming out next week, but the biggest market mover traditionally is the jobs report which will be released next Friday.

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