What Mortgage Rates Will Do Over The Next 30 Days (July 2, 2009 Edition)

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Are mortgage rates going up? Are mortgage rates going down? I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey may point you in the right direction.

The Bankrate.com survey is for conforming mortgages only. It does not apply to FHA mortgages, VA mortgages, jumbo mortgages, or foreign national mortgages. For rate quotes,.

The group's 30-day prediction for mortgage rates:

• 8% predict mortgage rates will increase
• 46% predict mortgage rates will decrease
• 46% predict mortgage rates will remain unchanged

I predict that rates will decrease over the next 30 days. 

In a world where every rate shopper has their own risk tolerance, however,  my prediction may not be appropriate for your particular situation.  I can't even promise this will be the best 4-minute recap you'll see today.

Here's what I told Bankrate.com:

"Markets unwind their inflation fears. Slowly."

It's been a crazy few weeks in the mortgage world, to say the least.  Shortly after Memorial Day, on the heels of better-than-expected economic data and surging oil prices, mortgage rates took off .  Partly, rates moved on fears of runaway inflation, and partly because of $4.00 gasoline seemed suddenly likely.

In just over 10 days, 30-year fixed rate mortgages increased 1.250 percent.

It was a fit of self-fulfilling prophecy, in hindsight. As concerns about inflation induced investors to sell mortgage bonds, mortgage rates rose because bond prices and bond yields move in opposite directions.  Then, as mortgage rates rose, Wall Street convinced itself that the Fed had no choice except to intervene so that rates could come back to good-for-the-economy levels.

Wall Street also knew the only way the Fed could make a material impact on mortgage rates was to increase it's $1.25 trillion commitment to the market -- an inflation-inducing event if there ever was one -- and that, too, led rates higher.

In other words, each rate tick higher begat another rate tick higher -- all based on expectations of the Federal Reserve.

Therefore, the Fed did the only thing it could do.  It stayed quiet.

While mortgage rates crossed into the 6 percent range, Fed Chairman Bernanke and Treasury Secretary Geithner said and did nothing about the situation, giving market participants no choice but to rethink the government's urgency for low borrowing rates.

Eventually, expectations began to shift and mortgage rates stopped rising.

Then, after last week's Federal Open Market Committee meeting, Bernanke again stayed silent on the matter of  rising mortgage rates, prompting another dip.

Now, today, mortgage rates are still higher than the government's "ideal" sub-5 percent level, but Wall Street isn't worrying about inflation as much.  Data has improved in a lot of sectors, but it can't necessarily be categorized as "strong". Plus, gas prices are falling.

Both of these developments are making a positive impact on mortgage rates and should continue to pressure rates lower over the next few weeks.

All of that said, however, all it takes is one shock to the system for rates to blow right past 6 percent and never look back.

Therefore, if you're not already working with a loan officer and know you'll need a new mortgage soon, you may want to participate in my Rate Watch program.

You can call orand I'll take a full loan application to keep on file and queued up. You'll also pick your "target rate" for me. It will then be my job to watch for your target rate and, when I see it, submit and commit your rate lock for you.  We then start working toward your home loan closing together.

Or, if you prefer to watch rates from the sidelines, consider adding me to your Twitter timeline at http://twitter.com/mortgagereports. I post several mortgage updates each day.