They say you catch more flies with honey than with vinegar. But do mortgage rates listen? No. Rates went up this week, and it was like putting out a glass of vinegar. Mortgage applicants drifted away.

The benchmark 30-year, fixed-rate mortgage rose 7 basis points, to 6.2 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week’s survey had an average total of 0.27 discount and origination points. One year ago, the mortgage index was 6.33 percent; four weeks ago, it was 6.22 percent.

The benchmark 15-year, fixed-rate mortgage rose 9 basis points, to 5.95 percent. The benchmark 5/1 adjustable-rate mortgage rose 7 basis points, to 6.09 percent.

They say birds of a feather flock together, and mortgage rates listened. After falling six weeks in a row, the benchmark rate has gone up two weeks in a row, like some sort of copycat.

Weekly national mortgage survey
Results of Bankrate.com’s Dec. 20, 2006, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
  30-year fixed 15-year fixed 5-year ARM
This week’s rate: 6.20% 5.95% 6.09%
Change from last week: +0.07 +0.09 +0.07
Monthly payment: $1,010.57 $1,387.91 $998.83
Change from last week: +$7.48 +$8.00 +$7.45

They say laugh and the world laughs with you; cry and you cry alone. Some mortgage bankers must have been weeping this week, because there was a big drop in mortgage applications.

According to the Mortgage Bankers Association, total mortgage applications fell about 10 percent compared to the previous week. The drop has everything to do with rates and little to do with people being busy Christmas shopping: The number of applications was about 14 percent higher than it was in the same week a year ago, when rates were an eighth of a percentage point higher.

They say you shouldn’t count your chickens before they’re hatched. Tell it to the bond market. Bond traders had been counting on a Federal Reserve rate cut sometime next year, and that’s why bond yields — and mortgage rates — kept falling all the way through November and into the first week of December.

A couple of weeks ago, bond traders and economists were discussing how many rate cuts the Fed would bestow next year. They were talking about how many rate cuts there would be, not if there would be rate cuts.

But the Fed put a stop to that last week when the central bank insisted that it’s still concerned about the prospect of resurgent inflation. The Fed implied that it’s more likely to raise rates next year than to cut them. Once the message got through to the bond market, Treasury yields went up and mortgage rates followed.

As luck would have it

They say even a stopped clock is right twice a day, and you can probably say the same about economists. Three economists for Wells Fargo tossed their economic forecasts into the ring this week. All were bullish, saying that they expect the economy to grow with some vigor next year.

Perhaps the most startling prediction came from Jim Paulsen, chief investment strategist for Wells Capital Management. He expects the yield on the 10-year Treasury to rise to around 6 percent a year from now. That’s a substantial increase; the 10-year has been yielding about 4.6 percent this week.

Paulsen acknowledged that his prediction “seems extreme at the moment,” but he notes that interest rates can move quickly.

Unfortunately for mortgage borrowers, Paulsen’s prediction implies an average rate on the 30-year fixed somewhere north of 7.5 percent.

Scott Anderson, senior economist for Wells Fargo & Co., says he thinks Treasury yields will be higher a year from now, but just a little.

Eugenio Aleman, also a senior economist for Wells Fargo & Co., declines to play the rate-forecast game, but says he doesn’t expect the Fed to cut short-term rates, and the central bank might raise them.