Welcome to Illinois Mortgage Rates and News week in review for the week ending October 31st, my take on the week's financial news and how it affected Illinois mortgage rates.
I hope you've all had a Happy Halloween. Last year I bought what I was sure was going to be plenty of candy for the trick-or-treaters, but around 7:00, after a big pack of kids came by, we were nearly out of supplies. My goal is always to get through the night without too much leftover candy. I try not to have too many sweets around as we can all do better without them, but I 
hated the idea of being one of those guys who didn't have candy when kids came by. I ended up racing out to the store for reinforcements. And, of course, we didn't have another visit the rest of the night. This Halloween I decided I was going to be better prepared and bought one more bag than I had last year. The evening started out slow with no one coming by until well after dark. I live in an older neighborhood with bigger lots and longer driveways. It seemed for a while that kids were bypassing our area for a close by subdivision where the homes were closer together, which means a shorter walk for treats and more candy in less time. With no one coming by I thought that might be the case again this year. Then everyone came at once. They were in there own smaller groups, but all the groups hit at the same time. Supplies ran low again, I panicked and sent my son out for more treats. And, again, that was it for the night. Now we have several pounds of excess candy which I will eat, and regret. It turns out my original prediction was just about dead on, but I panicked and figured that the flood of kids would keep on coming.
I think we are starting to see the same thing in the markets now. In the last few weeks since the credit crunch hit, the over all sentiment on the economy and nearly all the markets has turned down right gloomy. The Consumer confidence index came in this week at 38, much lower than expected and the lowest reading since they started the index back in the 1960s. The stock market rallied this week, but even so the drop over the last month has been staggering. The news on the housing front has been similarly bad. On a year over year basis foreclosures are up sharply and values are down. The talk is that we are starting or possibly hip deep in a recession that may be much more serious than any we've seen in years. There is no doubt that these are scary times, and I expect that things will get worse before they get better. But it is also clear that we are still in panic mode and the markets usually bottom out long before the economy improves. I'm thinking we are much closer to the bottom than most people realize.
Just a couple of months ago the biggest fear was inflation. Oil prices were up to $149 per barrel, and there were predictions that it would hit $200 within the year. Oil closed Friday at around $68 per barrel. The drop in oil and other commodities works like a pay increase to most consumers, paying less for gas gives them a little more for other expenses. Then you look at all the money that has been pumped into the economy over the last few months through the government's drive to contain the credit crunch and avert the worst of the down turn. So far we haven't seen much benefit from this huge infusion of money, but in the long run this will have an effect. There are signs that the credit crunch is slowly easing (the Libor and the Ted spread are coming down). Some of the panic is psychological. The election is just a few days away, and I think that everyone is anxious to have the election over, and having a new leader should boost confidence in the future. If the polls hold out and it is Obama, he has promised a $300 billion stimulus plan which would send money to strapped state governments, and build big infrastructure projects. This is aimed at getting more jobs and more money flowing. Expect more programs like this to come.
The Fed this week lowered their Fed funds rate down to 1%, the lowest it has been since 2003 and 2004. The problem now isn't that money is too expensive, but that banks are still afraid to lend. But all these signs point to a change coming. The combination of low rates and all this money being spent should do the job of priming the pump over time. There are other bits of good news out there. The US is still considered the safe haven for global money, and as the wave of panic crested globally, money flowed into dollars and T-bills. So even if we don't have confidence in our economy, global investors still do. Some astute commentators are saying that we are near the bottom in the stock market (others say we have a ways to go yet). In the real estate market, home sales were up over the previous month in September and inventory actually fell. This was before the credit crunch really hit, so my guess is the October number won't be so good. But what this does mean is that there are a lot of buyers out there, mostly first time home buyers without a home to sell, who are seeing the market as a bargain, and waiting for the right time to jump in. When ever the government sets monetary policy they have a tendency to overshoot. Right now deflation is the biggest concern, but down the road, with a few trillion more dollars pumped into the system, inflation could be the biggest problem. We are hitting the time of year when home sales naturally slow down, but I think there is a good chance that this winter could be the bottom of the market.
Mortgage rates are still trying to find direction. Mortgage bonds were worse most of the week, but after hitting a support level near their worst point for the year, they started to improve. All the indicators point toward lower mortgage rates and if this were a rational market rates would be considerably lower. But we are still in an irrational market where investors are afraid to own anything, so it may take some time before things normalize. If you are in the market for a mortgage, give me a call and I can help you figure out not only your qualification, but also help you with the timing and picking the right time to lock in your mortgage.
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% 6.548% APR
15 year fixed rate 6.00% 6.137% APR
5-1 A.R.M. 5.625% 5.783% APR
For Jumbo loans over $417,000
30 year fixed rate * 6.50% 6.615% APR *
Special pricing requires 25% down payment or equity
7-1 A.R.M. 6.25% 6.329% APR
FHA LOANS - 3% down payment
With 1 point origination fee - 60 day lock
30 year fixed rate 6.25% 6.727% APR
With no origination fee - 60 day lock
30 year fixed rate 6.50% 6.759% 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.
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 a breakdown of current Illinois mortgage rates, please visit Illinois Mortgage Rates and News.
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