Mortgage Rates Continue Up and Down Pattern

And this week, they are down.

Mortgage rates, that is. The one week up, two weeks down, two weeks up pattern continues as the markets try to outguess where the Federal Reserve is going with rates, fewer people apply for mortgages, and housing sales in some parts of the country also slide.

Freddie Mac's Weekly Mortgage Market Survey showed an encouraging little dip for the week ended July 27 as did the Mortgage Bankers Associations Weekley Mortgage Applications Survey for the week ended July 28.

Freddie's survey showed a drop of 8 basis points in the average rate for 30-year fixed rate mortgages to 6.72 percent as well as a decrease in fees and points to 0.3 from 0.5. This is the lowest level for fees and points during all of 2006.

The 15-year fixed rate mortgage averaged 6.34 percent compared to 6.41 percent the previous week and fees and points were unchanged at 0.4. The 5/1-year adjustable rate morning was down only one basis point to 6.35 percent but fees and points dropped form 0.6 to 0.4. The 1-year ARM eased from 5.80 percent to 5.78 percent with fees and points unchanged at 0.7.

Frank Nothaft, Freddie Mac's vice president and chief economist stated "Mortgage rates drifted lower this week on indications that economic growth is moderating .... Remains under under control and the Fed just may pause raising rates for a while. Meanwhile, recently released new homes sales ... lower than expected rate. That drop can be traced directly to higher mortgage rates, which ..... helping to slow the growth of house prices in 2006."

Rates in actuality have not made much upward progress this year. The first week in January the following were average rates:

30-year fixed: 6.21 & 0.5
15-year fixed: 5.76 & 0.5
5/1-year ARM: 5.78 & 0.7
1-year ARM 5.16 & 0.7

Thus the different over seven months of rollercoaster changes ranges from 51 to 62 basis points.- not exactly a sea change.

The MBA survey reports similar results for the week. The 30-year fixed-rate mortage was down 7 basis points to 6.62 percent with points (including the origination fee) dropping from 1.07 to 1.00.

The 15-year fixed-rate mortgage was down a minimal 3 basis points to 6.28 percent with points also down 7 basis points to 1.00 and the one-year ARM was the big winner decreasing from 6.25 percent to 6.18 percent with points down from 0.83 to 0.81.

All rates are for conventional 80 percent loan to value mortgages.

Mortgage applications as measured by the Market Composit Index were down 1.2 percent on a seasonally adjusted basis, the lowest that index has been since May, 2002. On an unadjusted basis it for 1.4 percent lower than a week earlier. The index was down 29.0 percent compared to the same week in 2005.

Refinancing as a share of overall mortgage applications was up slightly, from 35.6 percent to 37 percent from the previous week while ARM mortgages were down from 28.6 percent to 27.8 percent. This is the lowest share of mortgage activity that ARMs have garnered since March 2004.