Welcome to Illinois Mortgage Rates and News week in review for the week ending January 23rd 2009, my take on the week’s financial news and how it affected Illinois mortgage rates.

For much of the last year the markets see-sawed back and forth trying to decide which danger they should be most worried about, inflation or recession. For a time last summer when oil and commodity prices were soaring ever higher, it looked like inflation (or a hybrid stagflation) was gaining the upper hand. But over the last months as the banking system neared collapse and the economy spiraled down, it became clearer and clearer that our economy was in more than a garden variety slowdown, and this was a severe recession, or maybe something worse. With the whole global economy in a panic, and oil, housing and commodity prices falling, inflation looked like it was down for the count. But market sentiment dies hard. Even as the economy remains stalled, fear of inflation is again the big worry in the markets this week.

Much of the news this week revolved around the inauguration and what would now happen with the new administration in charge. The stimulus plan is the centerpiece of change for the economy and this is where most of the concern was directed. Some economists have criticized the plan for not being big enough, or for not getting the money out fast enough to get us moving again. But the markets this week are more optimistic. Market sentiment is that the stimulus plan will work too well. They fear it is too big, and it will cause us to overshoot and go from stalled to overheated. The question then is how do we pay for all this? And the answer is that we will crank up the printing presses and create more money, causing rampant inflation. This may be. But it seems a little like telling the firemen not to spray too much water on your burning house because you are worried about a flood. The truth is that no one knows what will work and what won’t. Inflation is the worry this week, but soon it will be something else. The one thing you can always count on is that markets are fickle and will change quickly.

Unemployment claims went up by 11.8% this week. Corporate earnings were mostly down and disappointing. Housing starts were lower than expected, and they were expected to be low. Overseas, the UK announced that they are officially in a recession, and China’s growth rate is decelerating rapidly. Bank of America and Citigroup received more federal TARP money this week, and Freddie Mac says they will need another shot of capital. So the economic news continues to be variations on a theme.

Mortgage rates this week have ticked up, but are still near historic lows. Rates will always fluctuate, but my guess is we are likely to remain in a range over the coming months. It is not only the bad news in the economy that is keeping mortgage rates low, but the fact that the Fed is in buying up mortgage backed securities in an effort to lower rates and get the hosing market moving. As of Thursday they have purchased just over $52 billion in mortgage backed securities out of a goal of $500 billion by the beginning of July. If you are thinking of refinancing or buying a new home, this is may be a once in a lifetime chance to get a low, low rate. The Fed is the big gorilla in the market now. When they stop buying, rates are likely to rise. Here is a link to the New York Fed which tracks the Fed’s mortgage bond purchases. This number is updated every Thursday.

Here is what Illinois Home mortgage rates look like today for an A+ (740 Fico or above), full doc purchase or rate/term refinance on a 45 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      5.25%    5.384% APR

15 Year fixed Rate     4.75%   4.836% APR

5-1 A.R.M.                    5.125%   5.263% APR

For Jumbo loans over $417,000

7-1 A.R.M.                   5.375%       5.598% APR

(For Jumbo loans consider breaking your loan into 2 parts – conventional to the limit and a HELOC for the rest.)

FHA LOANS - 3% down payment

With 1 point origination fee – 60 day lock

30 year fixed rate      5.00%      5.928% APR

With no origination fee – 60 day lock

30 year fixed rate      5.50%      6.023% 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.

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