A Mortgage Rate Prediction For The Next 7 Days (August 19, 2010)

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Looking to lock a mortgage rate this week? Wondering if you should float your rate instead? I'm a contributor to the Bankrate.com Mortgage Rate Trend Index and this week's survey should give you guidance.

Conforming Mortgage Rate Predictions Only

First, the fine print. These mortgage rate predictions are for Fannie Mae and Freddie Mae mortgages in Cincinnati, Ohio; Potomac, Maryland; and everywhere else.

FHA streamline refinances are not covered because FHA mortgage rates are based on the price of GNMA securities. Furthermore, unique property types including non-warrantable condos in Chicago, condotels in Florida, and loans for investors with 5 to 10 properties financed are excluded.

for a real-time rate quote.

Breaking Down The Predictions

Here's the mortgage rate outlook for the upcoming week:

• 47% think mortgage rates will increase
• 6% think mortgage rates will decrease
• 47% think mortgage rates will won't change

I expect mortgage rates to decrease.

My advice not be appropriate for your individual situation and I'm not always right. Ultimately, you may find your time better spent playing The Lying Down Game.

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

"After a brief pause, rates resume sliding."

I am the only survey participant calling for a drop in rates this week so heads-up.

The Long-Term Trend Of Falling Rates

Looking back to mid-April, mortgage rates have been falling. It's been a gradual shift. So gradual, in fact, that most people weren't even aware that a Refi Boom had started until it was 10 weeks old.

Between April and early-July, mortgage rates cut new lows nearly every week.

And, we can't lose sight of why rates fell every week because, fundamentally, nothing has changed in the economy since. You could even make an argument that today's economy is more conducive to low rates than from April.  The jobs market has been slow to rebound, home values are stagnating, and global economies remain shaky.

Even the Federal Reserve adjusted its expectations lower.

And, why have mortgage rates dropped so far these past few months? Because there's no reason for them to do anything else. The mortgage bond markets set the tone for mortgage rates and bonds have been in rally mode.

Think of it like physics -- an object in motion tends to stay in motion unless acted upon by outside force. And, right now, there's no outside force to act on mortgage rates.  Until there is, rates should continue to slide.

The trend is your friend.

The Subtle Signals That Change May Be Coming

Now, there's a caveat in this inertia argument. Although mortgage rates are sliding, there comes a point where that "outside force" shows up. Sometimes, it comes unannounced (i.e. change in government policy, terrorism); most times, it can be forecast.

If the bond markets were meteorological, the Doppler radar would show threats to low rates in the vicinity.

• The VIX Index is elevated
• Mortgage bonds are carving out wide ranges daily
• 5-month bond rallies are relatively uncommon

Therefore, despite low rates, now is probably not the time to sit back and see what happens.  Don't be greedy.

Rates May Drop, But It's Time To Lock-In Anyway

Mortgage rates are really, really low. Take the bird-in-hand. Get started on that refi.

To give an application and get locked, call my office at 513-443-2020. It'll be 4-minute call and I'll get a guaranteed interest rate in your hand within an hour. Or, if email is more your thing,and we can get started that way instead.

Either way, it's time to make a move..