Where are mortgage rates headed? Are mortgage rates going lower or higher? Although nobody can predict where rates are headed, I can offer you my insight.

The Federal Reserve has yet to begin its continued purchase of $600 Billion worth of Fannie Mae bonds, known as Quantitative Easing. What does that mean for you? I am glad you asked. The Fed has installed this program to bring down market interest rates. Due to the fact that Fed Funds rates are close to zero and they have no other way to reduce interest rates, the Fed decided to do what is called "Quantitative Easing" another term for buying back Fannie Mae bonds.

The market was recently spooked by this announcement, as the market deems these purchases inherently bad for the economy, and had the opposite effect, causing mortgage rates to go up. This is because the Federal Reserve is essentially printing up money to buy back its own bonds, which could be inflationary.

However, with the economy stuck in a severe recession and retailers, producers not able to raise prices due to slack demand, these concerns are unfounded, at least in the near term.So, the effect of quantitative easing will be one which will lower rates due to the Fed's massive buying power. Lowering the supply of Fannie Mae bonds available for purchase through this quantitative easing, will raise the price of the bond, and thus lowering the yield or interest rate.

So yes, we will see a pullback in rates in my opinion. Don't wait too long to lock in your rate when it does go down, as the Fed's buyback is only temporary.