Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending August 22nd, my take on the week’s financial news and how it affected Illinois mortgage rates.

This was another week in the mortgage bond market with huge volatility on a day to day basis, but an amazingly stable market when you squint your eyes and look just at the week end results. In other words, mortgage bonds went up and down like crazy , but mortgage interest rates ended the week just about where they started. This is the end of August doldrums, and there wasn’t a lot of market changing news released this week. Still, there were a couple of events that make me think that the market focus is starting to change.

The PPI (Producer Price Index) a measure of inflation, jumped 1.2% in July, the largest increase in 27 years.

Inflation hawk and Dallas Fed Chairman Richard Fisher warned in a speech that though the economy was slowing, the up-tick in inflation could lead to a “lingering inflationary fever”.

Over the last couple of months either of those items would have been enough to spark a huge sell-off in mortgage bonds. That didn’t happen this time. There was plenty of news showing the economy is still slowing, but the inflation fear would have trumped the other news. Mortgage bonds actually broke through and ended the week above a stubborn level of resistance. Some of the inflation is obviously seen through the rear view mirror, but in the past it hasn’t mattered. Bond traders have been wearing their inflation blinders and they would take any excuse to sell. The fact that the market took this news in without flinching makes me think we are likely to see better rates in the near future.

The big news this week (or really lack of news, but focus of rumors) was the condition of the big dogs in the mortgage arena, Fannie Mae and Freddie Mac. Their stocks sold off again this week as rumors of their impending demise continued. The Treasury has already announced that they will stand behind Fannie and Freddie, and a bail out has been worked into all the market equations. But knowing it is coming while not knowing when or how (or who wins and who loses) has kept the organizations in limbo. Fannie and Freddie are the biggest buyers of mortgage loans, so getting them out of limbo and in a position to buy will help stabilize the housing market. Letting it go on as it is now, with everyone knowing something is coming but waiting to see how it all pans out, makes for more fear and insecurity, which puts more pressure on Fannie and Freddie, keeping a negative loop going. I’m guessing that this will all come to a head soon, and the bailout will become official.

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

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 6.50% 6.852% 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.

Illinois Home Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending July 4th, my take on the week’s financial news and how it affected Illinois mortgage rates.

First of all, happy 4^th of July to everyone. Independence Day is one of my favorite holidays. This is when summer really kicks in. I like the parades, festivals, barbeques and fireworks. And this holiday is all about freedom, something we take for granted but it is good to be reminded of what we have, and what we could lose if we don’t pay attention. That being said here is the breakdown of what happened to affect mortgage rates this week.

The key data this week was all about jobs. The ADP national employment report released Wednesday showed a loss of 79,000 jobs, many of them in the service sector which had been the one area that had been holding up the best. The jobs report yesterday showed the 6^th straight monthly decline with a loss of 60,000 jobs, right in line with expectations. It also showed a revision showing another 52,000 jobs lost over the previous 2 months. New claims for unemployment insurance moved up to 404,000 this week – the highest since the Katrina disaster. All these signs taken together show that the economy is muddling along at best. We may not officially be in a recession, but for most people it feels like one.

On the other side of the equation, oil prices moved up again closing at $146 per barrel. Gas prices at the pump here in Illinois (more specifically the Chicago area) are up past $4.00 per gallon. The news reports people are now driving less. It will take some time to see if the lower demand will be enough to drive prices lower. The European Bank hiked rates by a .25% on Friday to fight inflation, but the wording in their statement indicated this is probably going to be the only hike. German manufacturing was down sharply, so many analysts expect that the economy is slowing there, as it is here, and that on its own will bring inflation rates down.

The stock market finished its worst June since 1930. The Dow Jones decline has been just over 20%, the official mark of a Bear market. Losses from banks and big financial’s have led the way and the auto makers released awful sales reports this week and their stocks suffered. Even Starbucks, seemingly invincible, announced that they will be closing 600 of their lower producing stores. With these signs of the slowing economy, the sting of inflation is now looked at more as another factor crimping people’s spending than a reason we need to raise rates now. At least that’s the thinking for this week.

The mortgage bond market was holiday shortened and thinly traded this week. That doesn’t mean that the week wasn’t volatile. Mortgage bond prices moved up and down like a yo-yo this week as they tried without success to break through a key area of resistance. The week ended on a sour note with bonds worsening (rates moving higher) even as the jobs report showed softness. It is common for markets to sell off on long weekends as traders unwind positions beforehand.

Mortgage rates are just a little worse on the premium side than they were at the end of last week, but overall unchanged. We are still trading in a narrow pattern and mortgage rates are between 2 levels of resistance.

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 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%   6.589% APR

15 year fixed rate    5.875%   6.124% APR

5-1 A.R.M.               5.625%   5.788% APR      

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

For Jumbo loans over $417,000

30 year fixed rate*   6.875%    6.997% APR – Requires 20% down payment

7-1 A.R.M.*              6.125%    6.327% 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    6.125%     7.048% APR

With no origination fee –        60 day lock

30 year fixed rate    6.375%     7.056%

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. Thanks and have a great Holiday weekend.

Illinois Mortgage Rates and News

Welcome to Illinois Mortgage Rates and News week in review for the week ending June 27th, my take on the week’s financial news and how it affected Illinois mortgage rates.

The Fed took the spotlight this week, and as anticipated, they left interest rates the same but talked tough about the threat of inflation. Wall Street wasn’t happy with the decision. The Dow hit a low just ticks away from a 20% overall decline, the official mark of a Bear market. Not only did the Fed not raise rates, but their announcement balanced the threat of inflation with the threat of further slow downs in the general economy. This signaled that the Fed plans to stand pat, keeping rates the same until something forces their hand. The stock market dived and mortgage bonds benefited. Mortgage backed securities moved through an area of strong resistance Friday afternoon, ending the week at their best level in the last 3 weeks.

The question this week, as it has been over the last few months is which is worse, inflation or recession? This is much like saying which way would you rather be tortured? Water boarding? Or bamboo shoots under your fingernails? If it’s all the same to you, I’d rather do without either. But the Fed doesn’t have that choice. The case for raising rates is that the low Fed funds rate has killed the value of the dollar, and oil is denominated in dollars so its rise is a direct result of the weak dollar. The argument here is that raising the rates will add value to the dollar and oil will fall once the Fed acts. This may be true, but the global economy is much more complex than this, and a raise in rates might do more harm than good. The credit crunch is still in force, and hiking rates would mean that credit goes from tight to a stranglehold, smacking the real estate market and the business climate down further. This would surely lower gas prices; with lower demand prices would have to fall. But if the economy falls into a deep recession, it could make matters much worse and killing the patient doesn’t make for a successful operation.

The other school of thought is that inflation is a problem, but the oil shock we are experiencing isn’t the same as inflationary spirals we’ve seen in the past. For one thing, there is no wage inflation. Inflation can destroy an economy if everyone thinks that prices on everything are moving higher. But wages are stagnant and with global competition no one expects wages to move up much any time soon. Prices are moving up on food, fuel and anything that uses petroleum, but if you look at the value of your home or the balance on your 401K the values are down. The other thing is that the Fed might not be able to do anything to control the inflation, even if they raised rates sharply. In a global economy there are more moving parts than in a Rube Goldberg machine, and the United States doesn’t have the economic power it once did. The cost of oil has been moving up steadily for years now. China, India and much of the developing world have been booming, and their demand for oil has pushed the cost higher. We also aren’t finding new oil supplies fast enough to replace the wells that run out. Add in a good dose of fear and speculation and it’s no wonder the price runs up higher. As the global economy slows down, speculation should ease and oil prices may come down as a result. At least a little. But the world has changed and most experts don’t think we will ever see cheap oil again. So the real question is the run up in oil inflation, or the new fact of life?

In other economic news, consumer confidence this week came in at the third lowest reading ever, and the lowest since 1980. Oil prices surged again, now up to $142 per barrel. Personal spending for last month was the best reading in the last 5 months, but if the stimulus checks are gone this is probably not a trend. New and existing homes both came in a touch better than expected, but still at low levels. Sales of homes in the Chicago area were down 29% from last year, but up from the previous month. Prices here seem to be stabilizing. The core inflation rate showed we are just over the target zone, giving the Fed some cover for their decision not to raise rates. Here in Illinois, Attorney General Lisa Madigan sued Countrywide Mortgage for abusive loan practices. I have mixed feelings on this one. I’m not a fan of Countrywide. As a company they have been arrogant and they were the leaders in some of the bad practices that got us into this whole mortgage mess. I also like Lisa Madigan. She’s done a good job as Attorney General, and I expect that she will be our next Governor. But that’s the point of this, it’s all political. Countrywide is a big target and an easy way to score political points, but unless they can show it was a corporate decision to defraud customers, I don’t see this going anywhere.

Mortgage rates are moving in the right direction, but the real improvement in mortgage bonds came at the end of the session on Friday afternoon, and most of the lenders didn’t re-price to show the improvement (it’s funny how quickly they re-price when rates are heading up, but are slower on the trigger when mortgage rates are moving down). The area of resistance that was keeping rates from improving may now act as resistance and a stopping point when rates are getting worse. It’s amazing how often points on a graph that acted as a ceiling become a floor when the market breaks through.

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 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%   6.589% APR

15 year fixed rate    5.875%   6.124% APR

5-1 A.R.M.               5.625%   5.788% APR      

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

For Jumbo loans over $417,000

30 year fixed rate*   6.875%    6.997% APR – Requires 20% down payment

7-1 A.R.M.*              6.125%    6.327% 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    6.125%     7.048% APR

With no origination fee –        60 day lock

30 year fixed rate    6.375%     7.056%

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.

Illinois Mortgage Rates and News

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.

This has been a brutal week in the mortgage bond market. Mortgage rates spiked to their highest point of the year this week before turning around and heading lower on Thursday. But by Friday afternoon the bad old market had returned and we were once again heading in the wrong direction. Brutal. The market trend is a surprise to most consumers. The Fed has aggressively lowered short term interest rates over the last few months, and the general perception is that interest rates are low and heading lower. Short term rates are, but not mortgage rates. The spread between the lowest mortgage interest rate we saw after the Fed made their surprise rate cut last month, and the highest rate we saw this week, is a full point – that is a 1% difference in rate. To give you an example of how this affects home buyers who need financing, on a $200,000 loan this works out to a difference in payments of $127 per month. Brutal.

The mortgage rate volatility raises two questions.

1. Why have rates moved up so much?

2. What direction are mortgage rates heading in now, here in Illinois and throughout the country?

As to the first question, part of it is just market psychology. All markets follow trends. They tend to move in one direction – up, down or sideways – until something happens to make the market shift in another direction. As I have noted before, mortgage bonds love bad economic news, but hate inflation. A few weeks back market psychology reversed from a focus on the soft economy to a focus on the fear of inflation once we get through the soft patch in our economy. The fact that this may be months down the line, and the economy may get worse isn’t a factor now. This is part of the reason that mortgage rates have moved up so sharply. But this is only part of the story. Another part is more complicated. Mortgage servicers, (these are the banks you pay your mortgage to) make their money by collecting and processing your mortgage payments. Any time rates move down the value of their loan servicing portfolio decreases because people will take advantage of the low rates and refinance their mortgages. To protect themselves from the run off in their loan portfolio from too many mortgage refinances, they hedged their positions in the mortgage backed securities markets. This caused rates to move up some, but it got exaggerated as hedge funds jumped on the trade in order to make a quick profit.

This brings us to the second question, where are mortgage rates headed now? The big move higher in interest rates seems close to running its course. The hedging from the big banks doesn’t make sense anymore now that mortgage rates are so much higher, so there is good reason to expect that mortgage rates will settle down some from this factor alone. As far as market psychology goes, mortgage bond traders are notoriously fickle. Right now they are focused on inflation, but that could change quickly. Most economists think that the credit crunch is alive and well, and the economy is a long way from getting out of the woods and escaping a recession. So all it will take is one bad economic report and we could see rates tumbling lower. My crystal ball is still cloudy, but I expect that rates will start to drop again over the coming weeks.

The January Core CPI (Consumer Price Index) rose at a 2.5% annual rate, showing that inflation is alive and well. The news was mixed In the housing sector. January Housing Starts were up slightly, but building permits were at the lowest level since November 1991. This is an indicator of future building and the low number reflects a lack of confidence in the market for new homes.

Fixed rate mortgages rates are again slightly higher this week than they were last week. If you have a contract to buy a home, you may want to consider a long-term ARM. The rates are lower while still giving you the stability of knowing your payment is locked in for a long time (5, 7 or even 10 years). The important thing is to match your mortgage to your financial needs and your life style. A 30 year fixed rate is a great way to go for some people, but you shouldn’t rule out other options. Adjustable rate mortgages can save you money up front, and if rates do drop again, we offer no cost refinancing, so you can lock into a fixed rate later if it makes sense.

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    6.125%     6.264% APR

15 year fixed rate    5.625%     5. 748% APR

5-1 A.R.M.               5.125%     5.279% APR       

7-1 A.R.M.               5.25%      5.363% APR

10-1 A.R.M.             5.625%     5.748% APR

For Jumbo loans over $417,000

30 year fixed rate*  6.875%     6.937% APR

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

7-1 A.R.M.              5.75%       5.823% APR

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

30 year fixed rate  5.875%      6.046% 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.

Next week the economic calendar is packed with reports – something important is coming out nearly every day – and there are going to be plenty of events that can move the market. Fed Chief Bernanke will be testifying before Congress on Wednesday and Thursday. So again, volatility should be high. If you have any questions, or if I can help in any way, let me know.

llinois Mortgage Rates and News.

Last week The Fed unexpectedly dropped the discount rate by a full 3/4s of a point. Since then my phone has been ringing off the hook. The Fed is expected to cut rates again today, so my phone should keep ringing. This happens every time the Fed announces a rate cut. Most people assume that a change in the Fed rates will mean a change in the rates charged for mortgages. There is some truth to this, but it isn’t a direct connection. In fact, it’s not uncommon for mortgage rates to jump higher when the Fed lowers the rates. (Last week the market did both – dropping at the announcement, but moving sharply higher by the next day.)

So the question is, why does it work this way? The short answer is that the Fed (The Federal Open Market Committee) controls short term rates, and mortgages are priced based on the expectation of long term interest rates. The long answer is more complicated.

The Fed controls short term interest rates by setting the federal funds rate and the overnight lending rate. These set the rates that banks can borrow from the Federal Reserve Bank. The Fed uses these interest rates as a way to control the money supply, putting more money in circulation at lower rates when the economy is slowing down, and raising the rates to slow down the economy when it is growing too quickly. When the fed funds rate is lowered, this lowers the banks cost of funds, which quickly translates into their lowering the Prime Rate (the rate banks charge their “best customers” – it is set 3 points above the Fed Funds rate). So when the Fed cut rates last week, anyone who had a home equity loan just found a little more money in their pockets. The conventional wisdom is that the Fed will cut rates again today, so this will help even more.

These short term rates can stay the same for months at a time. By contrast, mortgage rates change every day, sometimes (like last week) they can change several times in the course of a single day. These rates are set more by supply and demand, the same way as the prices move up and down in the stock market. Traders buy and sell mortgaged backed securities, which are similar to long term bonds.

When a wholesale mortgage lender (the big banks we lock our loans with) locks in an interest rate, they hedge the lock by buying a future contract tied to that mortgage rate. By hedging they are locking in their profit. As long as the loan closes, it doesn’t matter if rates go up, or down, they are protected from loss. Most mortgage lenders price to the market, so interest rates for mortgages change based on what is happening in the market. The wholesale lenders send out their rates each morning. If the market changes by more than a minor amount, they will re-price, so anyone locking in their loan will be subject to the new pricing.

When traders buy or sell a mortgage backed security, they are looking into the future and trying to anticipate what is going to happen years down the road. Mortgages are usually based on a 30 year term, but the average loan will be paid off earlier as people either sell their homes or refinance. Traders are usually looking out 5-7 years in the future.

Mortgage rates are most affected by the threat of inflation and the strength of the economy overall. When inflation rises, prices are moving up so it takes more money to buy the same amount of a good or service. To a mortgage holder this means that the borrowers are paying them back in cheaper money. Because of this, they react strongly to any hint of inflation, sending mortgage rates higher.

When the economy is growing strongly, it is the Fed’s job to keep inflation under control. It does this by increasing short-term rates, which slow down demand and act as a brake on the economy. Generally when the economy is strong, prices tend to increase. So if there is good news for the economy, it is bad news for mortgage rates. On the other hand, bad economic news tends to make the rates go down.

We are specialize in helping first time home buyers loan

So back to where we are now. We’ve been hearing lots and lots of bad news about the economy over the last months. With the housing market down, consumers are strapped and less likely to spend. The credit crunch is not just with housing though, some of the biggest concerns are with the losses by the big banks and bond insurers, and that we still don’t know the full extent of the problem. On the other hand, inflation is still a problem. Oil is up close to $100 a barrel, and this affects the cost of everything. Lower rates can fuel inflation, which in turn causes the mortgage bond traders to worry about their positions. So mortgage rates have moved back and forth based on the perception of which is a worse problem now, inflation or recession. An added layer now, is whether the Fed knows something the rest of us don’t, and this is why they have been so aggressive, or if they are floundering with out a firm plan.

My experience is that, over time, mortgage rates move in the same direction as Fed policy. If the Fed is reacting to a true slow down, inflation isn’t as much of a concern. In a real slow down deflation is a bigger worry. Mortgage rates now are slightly higher than they were before the Fed cut rates last week, but for a short period rates dropped to their lowest point in years. Over the last week, with the announcement of the economic stimulus plan and a rescue plan for bond underwriters, we’ve had some news come out that moved mortgage rates higher.It may not last, but my guess is we will see some news break on the other side, and over the next few weeks I won’t be surprised if mortgage rates start falling again.

Illinois Mortgage Rates and News