Where are mortgage rates headed?

Personally, I think the slight rise in interest rates we're seeing is because it's house-hunting season. I would expect them to drop again, maybe even lower than before, in the late fall... especially since we're having record numbers of foreclosures with more expected. The banks will be hurting for cash and home buyers so badly that they'll have to lower the rates again (at least for people with decent credit - people with bad credit can expect sky-rocketing rates). Of course, the confluence may cause the rates to go up as banks desperately try to make more money from fewer people and to see everyone as a credit risk... but I think that will be on an individual lender basis, not necessarily prime.

I'd be a squeaky wheel either way. Banks don't have any problem calling you every hour on the hour every day when you're slow... give them a taste of their own medicine. Given your circumstances, their delay could put you at risk of default on your current loan... which, if I were really paranoid, might be exactly what they're trying to do so they can foreclose and mitigate their risks.