Welcome to Illinois Mortgage Rates and News week in review for the week ending April 4th, my take on the week's financial news and how it affected Illinois mortgage rates.
This week was a good example of how bi-polar our financial markets have become. At the beginning of the week UBS, one of the biggest investment houses on 
Wall Street and a big player in mortgage backed securities, announced a loss of 19 billion dollars from its sub prime holdings. To me this would be looked at as bad news. This is a huge loss and a scary reminder of how Wall Street feasted on this junk, and how vulnerable these outfits are now to the risk from it. But that was just my take, and I am after all just an amateur. The professionals looked at it differently. They looked at this as great news. If the big players were writing down huge losses, this must mean the worst is over and we are about to turn the corner and happy days are ahead of us. The stock market had a huge rally (for a couple of days) and mortgage bonds tanked, sending mortgage interest rates higher. I hope they are right, but this seems like Alice through the looking glass, magical thinking. Some times bad news is just bad news.
By the end of the week we saw the other side of the coin. The monthly jobs report is usually the biggest mover in mortgage backed securities, which relate directly to interest rates. This report monitors employment, and the more people who are employed at good wages, the better the overall economy is. The opposite holds true, too. When employment is down consumers hold back spending and the economy suffers. I've talked before about how bad news for the economy is good news for mortgage rates, this is a prime example. The market was expecting a loss of about 50,000 jobs, and some news released earlier in the week showed a possibility that the number would come in much better than expected. The real number was a loss of 80,000 jobs, and the mortgage bond market skyrocketed, which meant that rates are again coming down. The other news in this report was a revision downward of jobs created in January and February to show another 67,000 jobs lost. So don't be surprised if this month's number turns out to be larger than expected when it is revised next month.
So what was the real difference between the optimism on the economy at the beginning of the week and the pessimism at the end? It was all perception and market sentiment. Mortgage bonds, and mortgage interest rates, are trading within a wide range. Volatility has been high, but there has been a ceiling and a floor, and the trading has bounced back and forth between these points. With the big run up in mortgage backed securities over the last few days, we are now starting to get close to the top of the range (which means the low end of the range for 
mortgage interest rates). In the past, as we hit that ceiling, mortgage bonds would bounce off of it and head back in the opposite direction, meaning mortgage interest rates would go back up. Chances are that at some point we will break through this range. With all the news on the economy pointing to a slowing economy, odds favor that when we do break out, it will mean that rates will drop lower. If you are thinking of refinancing your mortgage or are about to place an offer on a home, be sure and get your documentation into your mortgage lender ahead of time (or contact me, I welcome the business). You want someone who follows the market to help you time the best time to lock in your rate.
In other news, conventional ARMs are still out of the market, but some lenders are starting to test the waters again. Hopefully we will see more of a difference between fixed rates and adjustables in the coming weeks. Also, as FHA mortgages take up more and more of the slack from the tightening of conventional underwriting, we are seeing underwriting times get longer. If you are planning on buying a home or refinancing a mortgage and FHA is your best option, be sure to allow extra time for processing and closing your loan. We have some investors who are now taking up to 3 weeks for underwriting an FHA loan.
So how did all this activity affect mortgage rates? Although rates have moved a lot over the course of the week, they ended up close to where they were at the end of last week. 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 5.625% 5.746% APR
15 year fixed rate 5.125% 5.274% APR
5-1 A.R.M. 5.375% 5.587% APR
7-1 A.R.M. 5.625% 5.789% APR
For Jumbo loans over $417,000
30 year fixed rate* 6.875% 7.126% APR
(*We have one lender at 6.125% for a Jumbo fixed rate - if you meet their guidelines.)
7-1 A.R.M.* 5.625% 5.789% APR *there is a 1 year pre-payment penalty on this option.
FHA LOANS up to $410,000
With 1 point origination fee - 60 day lock
30 year fixed rate 5.625% 5.897% APR
With no origination fee - 60 day lock
30 year fixed rate 5.875% 6.246%
These are just a sampling of the mortgage rates available. Which option is best for you will depend on your own specific goals and circumstances. Check back regularly to keep up to date on any changes in the market.
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