Welcome to Illinois Mortgage Rates and News week in review for the week ending October 24th, my take on the week’s financial news and how it affected Illinois mortgage rates.

At the end of last week and the beginning of this week, it was starting to look like the markets were chilling and the real panic was over. Maybe not. The world wide panic has shifted from worries about the credit crunch to worries about the severity of the global recession. One trader defined this market as periods of panic interrupted by moments of calm. It is not just people or investors panicking, but the banks themselves. The banks are still afraid to lend money, and with all the markets in downdraft, investors are having to sell whatever they have, good, bad or ugly, in order to raise cash (except for treasury bonds, money is rushing into the safety of T bills). In a way this is like a margin call on the entire global economy. When you buy stocks on margin (with borrowed funds) and the stocks go up, a small investment can turn into a big return. We are seeing the opposite of that now. As prices of nearly every asset class drop, the banks, investors and other market participants need to come up with extra cash to meet their margin calls. With prices down they need to sell more in order to come up with the cash required, and this feeds into a downward spiral where lower prices feed more selling which means the prices drop even lower.

The remedy for this is two things, confidence, and liquidity. Governments, both here and abroad, are doing everything but dropping money from the sky, so liquidity is coming into the system. Confidence could take longer. The US is still looked at as the economic leader, in spite of all our problems, and having a lame duck president with almost no economic credibility is not helping to inspire confidence. The election just over a week away won’t solve the problems, but just knowing someone else will be at the helm may help to restore confidence that better times are coming down the road.

Some good news came out of the real estate market this week as existing home sales unexpectedly jumped by 5.5% last month. This was the biggest increase in 5 years. This is a sign that buyers are coming into the market as home prices drop. This is also a sign that the foreclosures that are now a big part of this market, are being absorbed. This does put pressure on the values of all homes, but it also means we are getting closer to equilibrium. Builders are not putting much new inventory on the market, and there are a lot of first time home buyers waiting in the wings, so we may be closer to a bottom than many people think.

All the economic reports continue to point to a recession and the big question now is how long and how deep it will be. Commodity prices are falling, oil is now down to around $65 per barrel, and gas prices are dropping like a stone. I don’t think this is going to make anyone want to rush out and buy a Hummer, but it will help ease the stress on budgets. Former Fed Chairman Alan Greenspan went before congress this week and basically said he’d screwed up. He said that he never saw this coming and he was sure that markets would regulate themselves better than the government ever could. All our financial turmoil now is a result of a flaw in the system he didn’t realize was there. We will be seeing a lot more regulation going forward.

Mortgage bonds started out the week with a huge rally. Rates improved through Wednesday when we were quoting some 30 year fixed rates at 5.875%. But volatility is still the rule, and despite a lot of good reasons why mortgage rates should be heading further down, bonds sold off heavily Thursday and Friday, breaking through support levels and ending the week at the worst point for the week. Mortgage rates are slightly better than where they ended last week, but much worse than where they were on Wednesday. This wide swing in mortgage bonds and mortgage rates has been the pattern over the last months. If you are in the market for a mortgage, the best thing you can do is understand how rates change, and be in a position to lock in when the opportunity presents itself. I expect that rates will drop again, but in this market there is no guaranty that they will stay down.

Here is what Illinois Home 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

The Truth About

30 year fixed rate      6.125%      6.254% APR

15 year fixed rate      5.875%      6.026% APR

5-1 A.R.M.                 5.625%      5.783% APR

 

For Jumbo loans over $417,000

30 year fixed rate  * 6.50%     6.615% APR *

Special pricing requires 25% down payment or equity

7-1 A.R.M.                 6.25%    6.329% APR

 

FHA LOANS - 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate     6.00%    6.632% APR

With no origination fee – 60 day lock

30 year fixed rate     6.50%    6.759% APR

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

 

These are just a few of the mortgage 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.

Expect the volatility to continue this week.

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