Welcome to Illinois Mortgage Rates and News week in review for the week ending May 23rd, my take on the week's financial news and how it affected Illinois mortgage rates.
The economy has been on a tightrope for quite some time, perched above the brink, on one side inflation the other 
economic stagnation. The Fed has been walking out on this tight rope, careful to not lean too far one way or the other. It's been a difficult task and so far it looks like they are dipping on both sides, but still maintaining balance. The economy is slowing and inflation is heating up, but there are signs we are heading in the right direction.
Right now the markets see inflation as the bigger threat. The Fed has signaled that they are through with rate cuts, at least for the foreseeable future, and that they are prepared to do whatever is necessary to stop inflation. But the inflation we are seeing now is mostly a result of higher commodity prices, especially oil. Oil prices were up again this week, hitting as high as $135 per barrel. You've seen the results at the gas pump and the super market, but this inflation hasn't carried over to higher wages. When economies get into inflationary spirals workers pay moves up too. In this economy the cost of anything requiring oil or transportation is going up, but paychecks are kept in line because of the slow economy and global competition. This squeezes the consumer more, but in the long run it will mean less demand, which will bring down the inflation rate on its own. We are seeing this now in how the high gas prices have taken out the psychological value of the stimulus checks that have gone out, and several Fed governors have suggested that they see inflation peaking and then heading down.
Again, the economic indicators this week were mixed. Inflation was tamer than expected, but the core rate was higher. Jobless claims came in slightly better than expected, but the 4 week average was again in the danger zone. Home sales were higher than last month, but down sharply from the reading last year at this time. According to the National Association of Realtors, In Illinois home prices were up by 8.5% in April over March, but down 27% from the year earlier reading.
As I've said before, markets move based on fear and greed. Mortgage rates are determined by what happens in the 
mortgage bond markets and how the fear and greed balance out. On a day to day basis mortgage rates have been extremely volatile, and it has become almost commonplace for mortgage bonds to go up or down 40 tics in a day, an amount that used to be exceptional. There have been days when the market has moved as much as 100 tics, with multiple re-prices during the day. But if you pull back and look at the activity from a longer view, we are going back in forth in a fairly narrow range. This week the mortgage backed securities markets had two days where prices went up, a lot, two days where they went down about the same, and one day, Friday, where they moved around a lot, but ended with no change. There was a huge swing between the high for the week and the low, but at the end of the week we were very close to where we started. Over the last two months we have seen this same trend, though in a wider range. The market reacts (overreacts?) based on news reports and whatever happens that day seems to be the most important factor, until the next, possibly contradictory report is released the next day. Chances are that as long as the forces of inflation and the slowdown counteract each other, we will continue to stay in this range. What this means is that you should be aware of these trends if you are buying a home or refinancing your mortgage, and take these trends into account when locking your loan. If you are in the market to refinance your mortgage, get your papers ready. We've had a couple of opportunities where the rates dropped to the lowest points, but the windows were only open for a short time. If it happens again you should be ready to jump on it. The same goes if you are in the market to buy a home here in the Chicago area.
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 5.875% 5.942% APR
15 year fixed rate 5.50% 5.657% APR
5-1 A.R.M. 5.25% 5.398% APR
7-1 A.R.M. 5.50% 5.659% APR
For Jumbo loans over $417,000
30 year fixed rate* 6.50% 6.674% APR - Requires 20% down payment
7-1 A.R.M.* 5.75% 6.014% APR *there is a 1 year pre-payment penalty on this option.
FHA LOANS
With 1 point origination fee - 60 day lock
30 year fixed rate 5.75% 6.159% APR
With no origination fee - 60 day lock
30 year fixed rate 6.00% 6.274%
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. Have a great Memorial Day and tune in later for more mortgage and real estate commentary.
Pete Thompson is an Illinois mortgage banker who provides superior mortgage service and competitive mortgage rates in Chicago, the Chicago area and throughout Illinois. Click here for a Free copy of The Real World Home Buyer's Guide - How to Save Thousands when Buying a Home and Getting a mortgage. For information on the latest mortgage news and current Illinois mortgage rates, please visit http://www.illinoismortgageratesandnews.com
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