Mortgage Rate Predictions For The Next 7 Days (February 10, 2011)

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Looking for mortgage rate predictions? I am a voting member in the Bankrate.com Mortgage Rate Trend Index. This week's survey should help you decide whether to lock or float your mortgage rate.

Conforming Mortgage Rate Predictions Only

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

Jumbo mortgages are not part of this survey because jumbos loans price differently. The same is true for FHA streamline refis. Furthermore, unique property types including non-warrantable condos and loans for investors with 5 or more properties financed are excluded.

for a real-time rate quote.

Breaking Down The Predictions

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

• 60% think mortgage rates will increase
• 20% think mortgage rates will decrease
• 20% think mortgage rates will won't change

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 watching Johnny Mac Trick-Shot Quarterback.

Either way, as I told Bankrate.com : "Thinking that the market 'is due' is not a strategy. It's a prayer. Get locked before rates rise again."

Trends : Mortgage Rates Up 9 Days In A Row

Mortgage markets are made on Wall Street, Wall Street is made of people, and people carry cognitive bias. As a result, the way that Wall Street thinks influences the way that Wall Street trades, which trickles down to Main Street for everyday homeowners like you and me.

A key concept here is Hindsight Bias.

Hindsight Bias is a person's inclination to view events as more predictable once they've already happened. For example, remember late-2008 when the recession was mounting? Job losses were mounting and consumer spending plunged as Christmas season approached. It was tough to open the papers, or turn on the news, without hearing predictions for depression.

2 years later, we know that the recession ended a few months into 2009 and that fabled depression never hit. And, in hindsight, it's obvious why -- consumers like to spend. Austerity can't last forever.

(Ed. note: Long live the iPhone.)

Hindsight Bias can leads to Confirmation Bias, and then to the Overconfidence Effect.

As applied to mortgage markets, cognitive bias is following the old saw "The trend is your friend" can be viable as a rate-lock strategy. Traders see what happened yesterday, they form a belief of why it happened, and then they convince themselves of how obvious the pattern was all along. The belief becomes a part of them, and they trade on it.

In other words -- absent new information -- Wall Street is a creature of inertia.

Mortgage Rates Are Rising Quickly

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.

It's a big risk to plan for lower rates right now. This 9-day losing streak is historically significant and when it ends, markets won't likely reverse lower. The long-term trend is for rising rates.

Within a few weeks, fixed mortgage rates should settle in the mid-5 percent range, with ARMs in the high-4s. 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 are 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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