Mortgage Rate Prediction For The Next 7 Days (February 3, 2011)

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Tracking mortgage rates? Want a prediction? I contribute to the Bankrate.com Mortgage Rate Trend Index. This week's survey should help you.

Conforming Mortgage Rate Predictions Only

First, the fine print. These mortgage rate predictions are for conforming mortgages in places like Falls Church, Virginia; Bucks County, Pennsylvania; and wherever else conforming and super-conforming mortgages are available.

Jumbo mortgages are not part of this survey because jumbos loans differently from conforming ones. The same is true for FHA streamlines. Furthermore, unique property types including non-warrantable condos and loans for investors with more than 4 properties financed are excluded.

for a real-time rate quote.

Breaking Down The Predictions

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

• 59% think mortgage rates will increase
• 6% think mortgage rates will decrease
• 35% 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 watching a 5-year old use The Force.

Either way, as I told Bankrate.com : "The events in Egypt spark a flight to quality. Mortgage rates fall."

World Events Influence Mortgage Rates

Mortgage rates are a direct product of the mortgage bond market, and the mortgage bond market is global.

Bond buyers and sellers live around the world just as the buyers and sellers of equities do. And how these buyers and sellers make their buying and selling decisions is based on the basic financial idea of Risk-vs-Reward.

Investors seek their highest rewards for the lowest possible risk.

It seems like a simple-enough concept, but risk levels change constantly. From an economic and political standpoint, risk is changed when governments pass laws; when businesses make investments; when people gain/lose confidence.  There's literally thousands of inputs in the risk equation.

Even weather can make a difference. Just think about how man-hours were lost this week to the storm.

But every now and again -- like what we're seeing this week in Egypt -- a world-altering event occurs, unleashing tremendous bits of uncertainty into the global investor psyche.  Uncertainty is equal to "risk", so markets rebalance their Risk-Reward equations.

Stock markets sell off, bond markets gain.  Mortgage rates fall.

Rates Are Still Climbing Long-Term

You can play this market in one of two ways:

1. Take the bird-in-hand; lock your mortgage rate now.
2. Gamble on the future; wait for rates to drop more.

It's a big risk to plan for lower rates more than a few days ahead. Once Egypt settles down into its future, mortgage rates will resume rising.  The long-term trend is still for rising rates.

Within a few weeks, fixed mortgage rates should settle in the mid-5 percent range, with ARMs in the high-4s. Then, toward the end of 2011, they'll likely be closer to historical norms in the 6s and 7s. Especially as the U.S. economy kicks into higher gear.

Get A Live Mortgage Quote Today

If you're shopping for a loan right now, here's what to do:

1. with the basics of what you're trying to do. Bullet points will be just fine.
2. I'll review your email and send you basic follow-ups
3. Upon your reply, I'll get live rates in your hand. You can lock or wait -- your choice.

Expect me to reply to your initial email within about an hour, during business hours.

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