Welcome to Illinois Mortgage Rates and News week in review for the week ending August 15th, my take on the week’s financial news and how it affected Illinois mortgage rates.

Over the last several weeks, mortgage rates have been going in a pattern, two steps forward – two steps back. Some weeks it is three steps forward and two steps back and other weeks it is exactly the reverse. In other words mortgage rates have been volatile with big daily moves either up or down, but over all they are in a tight pattern with mortgage rates hardly changing at all from week to week. We may be about to see a change as mortgage rates improve and break out of this dance. Then again, this could be a head fake to the outside before we return back to the range.

As has been the case over the last several months, there was a lot of contradictory information released this week. Early in the week the CPI (Consumer Price Index) came in with a red hot reading showing inflation at a 17 year high. The number was higher than expected, but it was expected to be high as a result of the high oil and commodity prices we’ve seen over the last months. This reading would have normally killed the mortgage bond market, but with oil prices coming down this was seen as a look in the rear view mirror and largely discounted. A couple of regional manufacturing indexes also came in with better than expected results. On the other side, the retail sales report looked weak, and even weaker when you factor inflation into that number. Unemployment numbers jumped to near 450,000, much worse than the 375,000 average we’ve seen over the first half of the year. The Michigan Consumer Confidence index also came in shaky at 61.7% just below the anticipated 62%, but the bigger news was that consumers are not as pessimistic about inflation in the future as they have been. Economists and market prognosticators are starting to think the same thing. Gary Stern, the Fed President of the Minneapolis region, announced in a speech that he expects higher unemployment and lower inflation as we go forward, another Fed member had the same sentiments earlier this week – a sharp change from what we’ve been hearing from other Fed governors recently, and another suggestion that the Fed won’t be raising rates any time soon.

The market is now starting to think that inflation may not be the biggest problem our economy faces after all. Why the switch? A couple of reasons. First, oil prices are coming down steadily. The price of a barrel of oil was as low as $111 on Friday and closed at $113. This is a big drop from the high of $147 a few weeks back, and even more amazing that it happened at the same time as an invasion by Russia into Georgia, an oil producing nation. The dollar is also strengthening steadily. As the dollar increases compared to other currencies, this should mean higher exports and lower mortgage rates. Maybe a bigger factor is that the rest of the world is starting to slow down along with the US. It used to be that the United States led the way economically for the rest of the world. Many economists recently have signed on to the theory that this is no longer the case, that with the rise of China and the European Union as economic powerhouses the rest of the world has decoupled from the U.S. and will continue to grow as we dip. It turns out that that is not the case. The economic downturn we have been seeing is now spreading world wide. Another suggestion that rates should be going down.

Then again, even as the macro outlook points to lower mortgage rates, consumers aren’t going to get the full benefit. Last week both Fannie Mae and Freddie Mac announced another round of extra fees and increased risk based pricing.

Mortgage rates improved this week and mortgage bonds moved above a level of technical resistance. There is another resistance level just above where mortgage bonds are now, but if bonds can move past that there is a lot of room for mortgage rates to drop. 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, or to get pre-approved for a mortgage, give me a call or  Contact me illinois mortgage company 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 6.375% 6.524% APR

15 year fixed rate 5.875% 6.014% APR

5-1 A.R.M. 5.75% 5.867% APR

7-1 A.R.M. 5.875% 5.989% APR

For Jumbo loans over $417,000

30 year fixed rate* 6.875% 6.634% APR

7-1 A.R.M.* 6.00% 6.173% APR *there is a 1 year pre-payment penalty on this option.

FHA LOANS - 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate 6.25% 6.713% APR

With no origination fee – 60 day lock

30 year fixed rate 6.625% 6.962% APR

FHA APR reflects 3% down payment and the effect of mortgage insurance on the loan.

These are just a few of the programs and mortgage rates available. Which option is best for you depends on your own specific goals and needs. If you have any questions or want to go over your situation in depth, let me know how I can help.

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