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Mortgage Rate Anxiety

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You can't time mortgage rates any more than you can time the stock market, but that hasn't stopped any number of my friends and colleagues from begging me to tell them if rates are going up or heading further down.

I have no idea.

What I do know is that borrowers are more sensitive now to mortgage rates than ever before in my memory, even as rates continue to hover near record lows.

All you have to do is look at last week's data on mortgage applications from the Mortgage Bankers Association. Rates jumped up over a quarter point, and applications to refinance plummeted 16.5 percent. Applications to purchase a home, which you would think would be far less sensitive to weekly rates, also dropped, albeit just 5 percent, but that was after many weeks of increases.

I thought it might be interesting to take a look at how applications run with rates. Take a look first at the last three months of rates compared to refis. You can see a definite correlation that when rates go down, applications go up. That's an easy one because a lot of refinancing is really just gambling with time.

Now look at the same comparison to purchase applications. You would think, again, that home buyers, looking at the big picture, would not move dramatically over a small shift in rates, but they do seem to move accordingly. This just tells me that home buyers today are more nervous, sensitive and cash-strapped than ever before.

So now to the question we all want answered, as we all try to figure out the Federal Reserve's moves in quantitative easing II, where are rates going on the 30-year fixed (by far the loan of choice today)?

Peter Boockvar, Miller Tabak:

"In the short term, because of the Fed's almost daily influence in the US treasury market with their asset purchases, it has gotten very difficult to predict where the 10-year and thus mortgage rates go from here, but I think the bond market action in response so far is a sign that they are going higher. That raises of course a huge risk for the Fed. Over the past 10 years, the average spread between the 10 year US Treasury yield and the average 30-year mortgage rate according to Bankrate.com is 155 bps, and as of today we are at 167 bps with Bankrate 30-year rates at 4.55 percent and the 10-year at 2.88 percent, so pretty close to average. Over the next 2 weeks the Treasury comes to market with more auctions and that will be key short test of sentiment to the current level of interest rates in light of recent events."

Paul Miller, FBR:

"I think the government wants low rates and will do anything possible to keep mortgage rates low - but by only buying Treasuries and not MBS, you might see rates go up. If rates go up to much, I believe you will see the fed use QE2 to buy MBS like they did last year. Still too many margin borrowers with floating rates loans, if rates shoot up, it will drive more borrowers into default and might drive buyers to the sidelines - not a good outcome for the housing market."

Questions? Comments? RealtyCheck@cnbc.comAnd follow me on Twitter @Diana_Olick