In its first week at least, the conservatorship of Freddie Mac and Fannie Mae accomplished one part of the hoped-for effect; longer term mortgage rates plunged to levels not seen for months.

Freddie's Primary Mortgage Market Survey for the week ended September 11 (which includes the four business days since Sunday's announcement of the take-over of what is now THE mortgage market in the U.S.) showed the average interest rate for the 30-year fixed-rate mortgage (FRM) at 5.93 percent with 0.7 point in fees and point.  During the week ended September 4 the average rate was 6.35 percent with 0.7 point. The last time the 30-year rate was this low was the week ended April 17 when the average was 5.88 percent with 0.4 point.

The survey reported that the 15-year FRM carried an average interest rate of 5.54 percent with 0.7 point compared to the week preceding the takeover when the average rate was 5.90 with 0.6 point.  This was also the lowest point for the 15 year product since the week ended April 17 when the average was 5.4 percent with 0.5 point.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were at 5.87 percent on average with 0.7 point.  The previous week the average was 5.97 percent with 0.6 point.  Again this rolls the rate back to April 17 levels when the average was 5.48 percent with 0.6 point.  During the week ended September 4 the hybrid averaged 5.97 percent with 0.6 point.

Only the one-year ARM bucked the trend.  That product, which is now gathering such a small share of the market as to be almost irrelevant, had a rate increase from 5.15 percent with 0.6 point to 5.21 percent, also with 0.6 point.

Frank Nothaft, Freddie Mac vice president and chief economist said of the survey results, "Interest rates for 30-year fixed-rate mortgages are down almost 0.6 percentage points over the past 4 weeks, which will help to spur home purchases and loan refinancing in coming weeks. This means that the monthly principal and interest payment on a new $200,000 loan is over $76 lower than a month ago.

"Lower rates have occurred at an opportune time, as the July pending sales data from the National Association of Realtors were off 3.2 percent from June. The Mortgage Bankers Association reported that refinance applications are up 18 percent over the past 3 weeks through September 5th, indicating that refinance activity has already begun to pick up."

Mortgage Bankers Association data on mortgage applications during the week since the federal takeover will be released next Wednesday.