Illinois Mortgage Rates Weekly Update
3rd July 2009
Welcome to Illinois Mortgage Rates and News week in review for the week ending July 3rd, 2009, my take on the week’s financial news and how it affected Illinois mortgage rates.
The news released this week continues the trend back toward lower rates, but gave more proof that the economy is bottoming out and the worst of the 
slide is over. There weren’t a lot of fireworks in the market since so many traders were taking the week off. On the good side, May factory orders ticked up 1.2% and the ISM index, a survey of purchasing managers throughout the country, showed an increase, suggesting more companies are running low on inventories and reordering. The Case Schiller index gave more evidence that housing is forming a bottom. Home prices are still going down, but at a much slower pace than before. On the downside, consumer confidence took a tumble again, falling another five points to 49.3. This is important because if consumers don’t feel confident they won’t spend money and it will be hard for the economy to recover.
The biggest market mover this week, as is usually the case, was the release of the unemployment report. This is always the most anticipated report of the month and this was no exception. Last month the numbers were much better than expected, and if they came in the same range this month it would be confirmation that the economy was rebounding. Didn’t happen. The report came in at 467,000 jobs lost in June, 100,000 worse than expected, and the worst rate in 26 years. This is better than the 600+ range we were seeing earlier in the year, but it is along way from stabilizing let alone recovery. This news sent the stock markets lower, and helped bond rates move lower. Because this was a Holiday shortened week where volume was low, mortgage rates didn’t benefit as much as they otherwise might have. But odds are good that we will see some improvement in pricing next week.
The purchase market is still alive and well as a result of low prices, still affordable mortgage rates and the $8,000 first time home buyer’s tax credit. The tax credit is a big incentive to buy now, and it only applies for those purchases that close before December 1st of this year. If you are in the market for a home and fit the criteria for the credit, make sure you allow enough time to buy and close before the expiration date. The clock is ticking. Here are the current Illinois Home mortgage rates for an A+ (740 Fico or above), full doc single family home purchase or rate/term refinance on a 45 day rate lock, with 0 points, and no origination fee. The conventional and FHA rates 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% 5.397% APR
15 Year fixed Rate 4.75% 4.848% APR
5-1 A.R.M. 4.50% 4.672% APR
For Jumbo loans over $417,000
30 Year Fixed Rate* 6.75% 6.897%
7-1 A.R.M. 5.375% 5.453% APR
(For smaller Jumbo loans another option is to break your loan into 2 parts – conventional to the limit and a HELOC or second mortgage for the rest.)
FHA LOANS – 3.5% down payment - FHA Maximum varies by County
With 1 point origination fee – 45 day lock
30 year fixed rate 5.25% 5.879% APR
With no origination fee – 45 day lock
30 year fixed rate 5.50% 5.863% APR
FHA APR reflects 3.5% down payment and the effect of mortgage insurance on the loan. Call for information on no-cost FHA streamlined Refinances
VA Veterans Administration 0 Down Loans
With 1 point origination fee – 45 day lock
30 Year Fixed Rate 5.00% 5.248%
Call for information on no-cost VA Streamlined Refinances
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.
Happy 4th of July!
Illinois Mortgage Rates First time home buyer loans
We Lend in All 50 States
Find the Maximum FHA Loan Amount in Your Area Here illinois FHA loans
Contact Your illinois mortgage company Today
We Offer illinois home mortgage Loans with best mortgage rates
Get Best Advice from illinois mortgage broker
Posted in Economics and Trends, Illinois Mortgage Rate Weekly Update, Opinions and Prognostications | 3 Comments »
buying mortgage backed securities in an attempt to lower mortgage rates and get the economy moving. Over the last 2 weeks there has been a mind shift in the financial markets. The biggest worry before was of the economy grinding to a complete halt. The markets bigger concern now is that the economy is growing too fast, and that the government is spending too much. The situation is similar to one of those optical illusions which look one way until you shift your perception, and then a different image forms and you can’t see it any other way. Like the Witch which becomes a beautiful lady, once your mind has made that shift, it’s hard to see the other picture the way you did before. 
Fed Chairman Ben Bernanke is in a tough situation now. Fed buying has been the engine that has kept mortgage rates low for most of this year. With the bond market in revolt, and treasury rates spiking, the Fed buying isn’t enough to make a difference. Two of the Fed presidents in speeches this week hinted that we may need to hike interest rates some time to cool things down. On the other hand, Bernanke is a student of the depression, and I doubt that rate hikes will be coming any time soon. The dilemma is that we are seeing improvement, but if the economy is going to be functioning at a sustainable level consumers have to lead the way. That will be hard as long as the housing market is still in the sick ward. Home sales have picked up, but there is still too much inventory on the market, and foreclosure are going to grow as long as the unemployment rate stays high. If rates stay high, this will knock the housing market down another notch, which will then do the same to the general economy. Low mortgage rates are a key part of the recovery plan, and the Fed doesn’t want to see the half a trillion dollars they’ve already used turn out to be wasted money. The Fed will continue to do what it can to bring mortgage rates down and keep them low. But for this to work, the market needs to have another shift in thinking. The picture looks a lot like a beautiful girl now, but one bad report and the Witch face pop out again. 
under reported in the main stream press, the bond market revolt which sent mortgage rates sharply higher on Wednesday. I wrote last week that volatility is returning to the mortgage rate market. Over the last several months the mortgage backed securities market has taken its cue from the Fed, and with heavy Fed buying of mortgage backed bonds and other debt, mortgage rates have dropped to historic lows and have stayed within a predictable range for the last several months. Last week we felt rumblings, little tremors in the financial markets. This week we had the earthquake. The government has been spending money at an unprecedented pace to fund the stimulus programs, 2 wars, and bail outs everywhere you look. Without government spending our economy would be frozen because the banks still aren’t lending and everyone else is afraid to spend. But in order to fund the spending, the government is taking on huge debt and printing more money, and both of which could lead to bigger problems over time, and this led to a breakdown in the bond market which fed into a panic selling route where the market lost 260 basis points in one day and over 400 for the week and mortgage rates rose over a ½ a point on Wednesday. The market recovered a good part of the losses by the end of the week, but we are now in new territory and it will take some time to see what happens next.
In other news, the highly anticipated plan for how the $8,000 first home buyers tax credit was released. After a big buildup with the expectation that this would allow the credit to be used up front for the buyer’s down payment … phbbbbt … bupkis … nothing. Or at least nothing that is going to bring anyone new into the market. The new rules (details again to follow) will let first time home buyers take a loan against the tax credit to use as additional down payment after they have already made their minimum 3.5% FHA down payment, or they can use it to pay for closing costs. But this is a solution without a problem. The home buyers looking to grab on to the first rung of the home ownership ladder aren’t worried about making extra down payment (which won’t save a lot off their monthly payment) and if they are short funds for closing costs they can negotiate for the seller to pay a credit toward their closing costs. Without a big need for what this new program will offer, I doubt that we will see the lenders and other parties make the effort to put together the infrastructure needed to make this work. Someone is going to have to make the 2nd mortgages secured against the tax credits, but with low demand, I don’t see a big move toward getting this together soon. If you are other wise well qualified and were hoping to become a first time home buyer this year, your best option is to call all your friendly relatives and see if you can get a gift for the down payment. Once you have bought and closed on your home you will be able to amend your tax return and take the tax credit this year, so you will get the credit back as a check a few weeks after you close.
predictable. Mortgage rates have gone up and down in this range (sometimes in the same day), and every move has been accompanied by some news which was credited with moving the market in that direction. But over this time the Fed has been a stabilizing influence. They’ve committed $1.25 trillion to buy mortgage backed securities to keep rates low, and so far their plan has worked flawlessly. But this week new fears are in the market and the worry is that it is going to be different this time. Mortgage bonds were near the best part of their rang on Wednesday after the minutes of the last Fed Open Market Committee were released and showed that the Fed has discussed extending their mortgage buying program if necessary, and renewing their goal of keeping rates low. But the best rates didn’t last long. On Thursday the mood of the markets shifted and both Treasuries and mortgage backed securities got blasted, sending mortgage rates higher (though mortgage bond yields are near the high end of the range, mortgage rates haven’t gotten hit nearly as bad). So the question now is, is this just more noise and we are still in the same range, or is it different this time, and rates are now poised to rise?
The big news last week was the announcement that the first time home buyer tax credit would be monetized and available for use as down payments on FHA loans. At the time, HUD Secretary Shaun Donovan said details would be released the following week (this week). The week is over and there is still nothing concrete. As I said at the time, this will take a while before we actually see this put in place and it looks like they got ahead of themselves by announcing this now before the plan was ready. Details will have to be worked out on how this program can work with FHA guidelines, how the lenders will incorporate it into their underwriting and closing processes and who will actually make the loans (based on the tax refunds) and how these loans will be secured. There is a lot to be done before this program is rolled out, but I expect this will be a major factor in the market once it is in place. We don’t have news yet, but the bets are that this program will be going forward and is likely to help a lot more first time home buyers buy homes now.
though not surprising when you consider how many people who have lost their jobs in the last year. Industrial production numbers were down, but not as much as expected and much better than last month’s figures. The Consumer Sentiment Index went up a touch, showing that people are feeling a little more optimistic about the future. Inflation gauges PPI and CPI (Producer and consumer price indexes) came in a little hotter than expected. CPI base rate was at 0% for the month, showing no inflation, as expected. The core rate however, which excludes volatile food and energy costs, came in .3% higher. Inflation may be building, but this is just as likely to be a blip in the numbers. Until the economy is back on track inflation will just be a secondary issue. 
This was a good week for mortgage rates. Mortgage rates improved 4 days in a row before ending the week on an off note. So we are now solidly back in the range we’ve been bouncing back and forth in over the last months. For some people low mortgage rates are starting to get boring. When rates first dived last December, there was a real frenzy to jump in and take advantage of the low rates by refinancing at a much lower rate. Mortgage rates are still in the all time low range, but the urgency to refinance isn’t the same, even for borrowers who could save a lot. Rates have been predictable lately, and it is likely that, with some ups and downs, rates will be in a good range for a while. But at some point rates will go up. If a refinance would help you now, don’t put it off for too long. 
conventional wisdom is now a step ahead of that and figuring if we are at the bottom now, a quick recovery is on the way. Two big things happened this week which gave weight to that opinion, the results of the stress tests on the 19th biggest banks were released, and the unemployment numbers came in better than expected. As always, the news was a little more nuanced than the headlines showed, but optimism is creeping in.
So what does all this mean for the direction of mortgage interest rates? Mortgage rates move mostly based on activity in the mortgage backed securities markets, but they tend to follow the lead of Treasury bills, debt guaranteed by the US government, which has always been considered the gold standard of safety. Treasuries have been getting killed over the last few weeks. This is partly a result of the optimistic mood in the markets (optimism means money flows out of bonds and into stocks) and partly because the government is borrowing so much money (through new Treasury auctions) and more supply means inflation is lurking somewhere over the horizon. Treasury yields have spiked higher over this time, but mortgage rates haven’t been hit nearly as bad. The big reason for this is that the Fed is holding up the mortgage market with a promise to buy $1.25 trillion in mortgages, of which they have already bought over $400 billion. They still have a tremendous amount of purchasing power, and so far, they have kept rates much lower than they would other wise be. But have we reached the end of the line earlier than expected? If the markets are expecting a fast recovery, and inflation, they’ll look past the Fed’s buying period, and mortgage rates will rise. This is possible, but most experts aren’t predicting a fast recovery. It is more likely that we will bump along the bottom, and as confidence returns there will be gradual growth. The markets are anxious for this to be over, but with high unemployment and consumers who are more prone to save what they have than go on a new spending spree, the recovery may be slow. Markets seldom move in straight lines. Sentiment changes and there are always blips, both higher and lower. Rates may go higher for a time, but in my opinion, the only way we can have a sustainable recovery is through an improvement in the housing market and for that to happen mortgage rates have to stay low. The government wants low mortgage rates, and they are doing every thing they can to make this happen. They may not be successful, but I wouldn’t bet against them.
This week the storm clouds moved in. A lot of economic news was released this week and the reaction raised interest rates in general, though mortgage rates didn’t get hit as hard as treasury rates did. Mortgage rates went from the lowest part of the range on Tuesday, to the high point on Friday afternoon. The question now is whether this is a blip in the long term picture and we will go right back to the range rates have been for the last few months, or if this is going to be a real change where mortgage rates start trending higher, even though the Fed is doing their best to keep rates low. 
bad thing. Boring is another word for stable, and it has been a long time since the mortgage market has been described as stable. This mortgage market has been ruled by volatility and it hasn’t been out of the ordinary for lenders to re-price two or three times within a single day. This is one of the things that most consumers aren’t aware of, that rates are constantly changing and the rate quoted in the morning may have expired before the afternoon hits. (This is why it makes no sense to shop mortgages by looking at ads in the newspaper, when the rates quoted were probably out of date before they were even posted.) But that was then and this is now. This week there were ups and downs both during the day and over the course of the week, but the fluctuations were small and all fit in a tight range. I’ll take boring and stable over the adrenaline inducing shift from highs to lows and back again, any day.
least starting to come out of its free fall. Consumer confidence is a little better than expected, the Fed Beige book shows some signs of moderation in the level of decline and the big banks all came out with record earnings this week. With all the money being pumped into the economy it should be pulling out of its dive, but we are still flying at tree level. We may have avoided the crash, but it is doubtful that we will be gaining altitude anytime soon. Consumers are still ruled by fear and caution, and aren’t likely to go out and spend if they don’t need to, and the job picture is still bleak. The bank profits are a different story.
world. The same thing happens with markets. Just a few short weeks ago the consensus view was all doom and gloom on the stock market. Stocks were low and headed lower. It was almost a sense of panic. Since then the economy has still had its share of bad news, and the overall outlook is not much different now than it was then. But the attitude now has completely shifted. The stock market is roaring upwards and commentators are convinced we are at the bottom of our downswing and ready to resume our upward climb. Over the last few weeks the news has been mixed. There have been some optimistic signs, but a lot of others which weren’t. But over the last four weeks the market ignored the bad news and saw only the good. Commentators who a few weeks ago were throwing up their hands and saying the sky was falling, are now insisting that the sky is the limit. This same attitude is now spreading to views on the overall economy, too. I’m hearing more people say that the worst is over and we are now starting to recover. Maybe.
Mortgage rates rose this week. Bad news is good news for mortgage rates, and with money flowing into the stock market, treasury bills got killed and mortgage backed securities, which often go in the same direction as treasuries, also had a bad week. Rates are closer to the top of the range they have been in over the last several months, but we are still in the range. Rates rose, but not nearly by the amount they would in a normal market. The Fed has committed to buy mortgage backed securities in an effort to keep rates low and their purchases have made the mortgage market much steadier than it would otherwise be. Their calming influence will help to insure that rates remain affordable even when market sentiment is rushing in the other direction. We are still in record low territory, and I think the odds are that we will continue to go up and down in this range. If you are planning on