What Mortgage Rates Will Do Over The Next 30 Days (February 19, 2009 Edition)

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I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey is now available.

The Bankrate.com survey is for conforming mortgages.  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:

• 18% predict mortgage rates will increase
• 46% predict mortgage rates will decrease
• 36% predict mortgage rates will remain unchanged

I am predicting that rates will remain unchanged over the next 30 days. My prediction may not be appropriate for your individual situation and it may be wrong, too.
Here's what I told Bankrate.com:

"If you don't like mortgage rates right now, just wait two hours -- they'll change."

The thing about mortgage rates that most people don't know is that they're based on the price of mortgage-backed bonds.  Bonds -- like stocks -- trade constantly.  The price is always changing.  

To illustrate that point, in the time it will take you to stop watching this video, mortgage bond pricing will have already changed more than once.

Mortgage bonds trade on expectations; expectations of the economy, of housing, of the dollar, and of inflation, among others.  When those expectations change, pricing does, too.  It's why markets have been a zoo lately -- rising when they should be falling and falling when they should be rising. 

Between Congress, the Treasury, the Federal Reserve and the White House, new policies and programs are changing trader expectations almost daily.  Sometimes, more often than that.

But just because mortgage bond pricing changes doesn't mean that mortgage rates will, too.

Mortgage rates, in general, won't move unless the pricing changes by some "bulk" amount.  If that's a strange concept, try thinking about it like the rungs of a ladder. Your foot can move up and down between the planks, but until it passes the next one, you haven't really changed your position.

Lately, markets have been stepping up and stepping down with alarming frequency.  However, no matter how much movement occurs, after a few days, markets keep returning to near their original starting place. To say that it's a frightening time to float a mortgage rate is an understatement.

In the meanwhile, don't forget to watch my Twitter feed for running commentary on mortgage rates, markets, and the like. Follow me at http://www.twitter.com/mortgagereports and join the conversation anytime.