Are mortgage rates going up? Are mortgage rates going down? I am a regular participant in the Bankrate.com Mortgage Rate Trend survey and this week's survey may have your answers.

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:

• 29% predict mortgage rates will increase
• 29% predict mortgage rates will decrease
• 42% predict mortgage rates will remain unchanged

I am predicting that rates will decrease over the next 30 days. My prediction may not be appropriate for your individual situation so don't go doing The Andy Dance just yet.

Here's what I told Bankrate.com:

"Look for a massive mortgage-backed bond purchase from the Fed. "

Last in 2008, the Federal Reserve pledged $500 billion to the mortgage markets; the money to be used for buying mortgage-backed bonds to help hold mortgage rates down.  Several months later, the Fed upped its commitment to $1.25 trillion.

Immediately following each pledge, mortgage rates dropped. This happened because the Federal Reserve's intervention create a new demand, making mortgage bonds more scarce.  It's the Law of Scarcity and it drives mortgage-backed bond prices higher which, by definition, means that bond yields will fall.

However, over time, market excitement turns to economic anxiety. 

Because the Fed finances its bond buys using freshly-minted U.S. dollars, the opposite of the Law of Scarcity is in effect.  With each new dollar printed and put into circulation, the value of all existing dollars fall.  Over time, this causes mortgage rates to rise because mortgage bond repayments are made in U.S. dollars and if those dollars are worth less, the demand for mortgage-backed bonds diminishes and yields rise. 

We saw this start to happen at the end of April through early this week.    Fears of monetary-supply inflation led conforming mortgage rates well into the 5 percent range.

Meanwhile, the government has implied to markets that sub-five percent rates are optimal so, if we reconcile that inference to the Federal Open Market Committee's last press release, it's possible that the Fed accelerates the timing of its bond buys to suppress the kind of rise in mortgage rates.

The Fed is buying at a measured pace of about $4.7 billion per day right now.  There's nothing to stop it from splurging to the tune of $20 billion or more at a time.  The net effect of a move like this would be lower rates in the near-term then higher rates towards the end of the year. 

Incidentally, most Fed officials think the economy will be on its way to a clear recovery by Q4 2009. Loading up on mortgage bonds now may get a better bang-for-the-buck than maintaining the same steady purchase pace through December.

If the Fed buys, rates will fall. 

I use Twitter to transmit near-real-time changes in the market.  You can watch my feed at http://twitter.com/mortgagereports. I post several updates each day.  You can also send me some information  so I can add you to a "watch list".  That way, when mortgage rates hit your target rate, we can be ready to jump on it.

Mortgage rates often follow Newton's First Law.  Commonly called "inertia", it states that an object in motion tends to stay in motion unless acted upon by an outside force.

In the world of mortgage-backed bonds, an "outside force" take many forms, including:

• Economic events (i.e. jobs and housing data)
• Political events (i.e. N. Korea missle testing)
• Psychological events (i.e. Safe Haven buying)

But of all the outside forces that alter the mortgage rate trajectory, today's most powerful one is the Federal Reserve.  Earlier this year, the Fed pledged $1.25 trillion to the mortgage markets to help keep mortgage rates low. 

It has $820 billion left to spend.

The gist of the Federal Reserve's Agency MBS Program is to create massive demand for mortgage-backed bonds over a short period of time, pushing bond prices higher and, therefore, bond yields lower.   This is why mortgage rates plunged after the Fed first announced the program in December 2008.

Here we are, though, one-third of the way through the year and one-third of the Fed's budget is gone.  Yet, mortgage rates are rising over 5 percent.  This is exactly what the Fed doesn't want to happen.  Therefore, it's entirely possible that the Fed calls an audible on the Agency MBS Program in the coming weeks, changing it in one of 2 ways:

1. Accelerate the pace of its purchases in the next 60 days
2. Increase its mortgage market commitment from $1.25 trillion to something higher

Either action would shake mortgage rates off their current trajectory, causing them to fall; and probably by a lot.

This brings us back to inertia. 

Mortgage rates respond to outside forces and the Federal Reserve may just be the ultimate outside force.  When Plan A didn't work for the Fed, they implemented Plan A-But-Bigger.  Now, if Plan A-But-Bigger doesn't work, it's reasonable to expect Plan A-The-Biggest. 

Remember, the Fed's original plan was to purchase $500 billion in agency debt.  When that was deemed too little money to make a difference, however, the Fed threw another 1-and-a-half times as much cash at the problem. 

Given how rates are rising, we can't rule out this subsequent expansion.

Increasing the size of the Agency MBS Program, or even just accelerating the rate at which bonds are purchased, would cause the rate hikes of the last two weeks to unwind overnight.  It would also provide an ample buffer against rising oil prices and inflation-centric trading that tends to draw mortgage rates up. 

If you're living in Cincinnati, Illinois or elsewhere and fear you missed the Refi Boom of 2009 -- a final Fed intervention might be your last chance to cash in.

When the Federal Reserve talks about the Agency Mortgage-Backed Security Purchase Program, its stated goal is to "foster improved conditions", Fed-speak for "keep mortgage rates low".  The higher rates go, therefore, the more likely the Fed will step in as that outside force.

Should the Fed intervene one last time, be ready to lock in when it happens.  The economy is starting to recover, after all, and once the recovery's complete, the Fed won't need to run its buyback programs anymore.

If you've got a specific interest rate target in mind,  and we'll put a "watch" on it.  When your rate hits, you'll get it.

Several weeks ago, the Federal Reserve pledged $500 billion to the mortgage-backed bond market and, after the announcement, mortgage rates fell.

This happened because conforming mortgage rates are directly correlated to the demand for mortgage bonds.  When demand rises, prices rise with them, thereby causing rates to fall.

The Fed's announcement was timely. 

After reaching a peak volume of nearly $1.0 trillion this summer, foreign nations got nervous about the health of the U.S. economy and began to divest their U.S. mortgage-backed debt holdings. 

Over a 3-month period, demand for mortgage bonds from overseas fell 17 percent, creating an excess bond supply that was mostly responsible for October's high mortgage rates.

If you bought a home late last year, you remember that 30-year fixed rate mortgages were pushing 7 percent.

And then the Fed stepped in.  By adding $500 billion worth of demand in a coordinated effort, the Fed offset waning foreign demand and altered the mortgage bond landscape.  The mere announcement spurred a mortgage bond frenzy and, as a result, rates fell sharply.  October's 7 percent mortgage turned into November's 6.  Rates have since fallen further.

On New Year's Eve, the Fed said it would complete its $500 billion block of purchases prior to June 30 -- an average of roughly $4.1 billion per business day.  Over the first few days of 2009, however, the Fed's cumulative purchases fell roughly 25 percent short of pace.  This tells us that the Federal Reserve could be carefully selecting the days on which it intervenes in order to make a maximum impact on mortgage bond markets.

It also foreshadows a highly unpredictable period for mortgage rates.  High demand or not, until the markets figure out the Fed's Playbook, don't expect the usual "rate triggers" to apply.