The Mortgage Rate Prediction For The Next 7 Days (April 22, 2010)

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Need a mortgage rate prediction? I am a weekly participant in the Bankrate.com Mortgage Rate survey and this week's survey may have the answers you need.

Fannie Mae And Freddie Mac Mortgage Rates Only

By way of disclosure, the Bankrate.com survey is for conventional, conforming mortgages only. It does not apply to FHA mortgages nor is the survey specific to Ohio or Illinois mortgage rates. Furthermore, unique property types including non-warrantable condos and condotels may be excluded.

for a real-time rate quote.

Breaking Down The Predictions

Here's the group's mortgage rates predictions:

• 47% predict mortgage rates will increase
• 12% predict mortgage rates will decrease
• 41% predict mortgage rates will remain unchanged

I expect mortgage rates to increase.

My advice not be appropriate for your individual situation and I'm not always right. Ultimately, you may find your time better spent with D'Andre Cole than reading my analysis.

Either way, here's what I told Bankrate.com:

"While gas prices rise, so will mortgage rates. Get locked ASAP."

Rates are already pushing north. The best rates of the month have passed.

Gas Prices Are Tied To Inflation

Gas prices are up 10% in the last 2 months and the summer driving season hasn't even started yet.  And more than any other force, rising gas prices can foreshadow higher mortgage rates for homeowners because it's inflationary.

The relationship is indirect but worth a look.

First, the catalyst.  Oil prices rise.  This happens for one of 3 reasons:

1. Growing economies are expected to consume more oil (i.e. more demand for oil)
2. The world's oil exporters reduce drilling capacity (i.e. less supply of oil)
3. The U.S. dollar loses value and oil is bought/paid for using U.S. dollars

We're seeing a combination of all 3 right now.  Economies are expanding, oil availability is down, and the dollar is weaker.  As a result, crude oil is up 20% in the last 2 months.  That's a lot.

Then, as oil prices rise, the higher cost of energy spills into everyday life, creating inflationary pressures and causing mortgage rates to rise.

Inflation is the enemy of mortgage rates.

The Other Reason Mortgage Rates Are Rising

Lately, mortgage rates have been artificially low. There's no good reason why we're seeing conforming mortgage rates at levels like this.  The Fed left the MBS market March 31, 2010 and rates were supposed to rise in response.  But they didn't.

It's because of "safe haven" buying.

Safe haven buying, in a nutshell, is when investors move assets to safe places to avoid a sudden increase in risk somewhere else.  Mortgage bonds, of course, are considered "safe".  They're backed by the U.S. government.

Meanwhile, safe haven buying can be triggered by geopolitics, meteorological events, and financial "problems", among other things. Since the start of the month, we've had all three. Eyjafjallajokull and Greece took most of the headlines and as these events transpired, mortgage rates improved.

The events have now passed.

The ash cloud is gone and Greece secured the IMF's help for its debt.  Safe haven patterns are no longer needed.  Mortgage bonds will unwind as a result.  Mortgage rates will rise.

Get Your Rate Lock Turned In ASAP

There's little to keep mortgage rates low right now.  The Fed is out of the market, the economy is gaining, and safe haven buying is hasta la bye-bye.

It's time to move into locking position. MRV -- Mortgage Rate Velocity -- is as high as its been in a year.  Rate changes are fast and damanging.  If you haven't given a loan application to your loan officer, do it today. The longer you wait, the more this next loan is going to cost you.

Applications-by-phone are a 4-minute process. To give one, call my office at 513-443-2020 or. And be sure to give applications to other loan officers, too. Don't worry -- your credit score won't be damaged if you do it the right way.