Frank Nothaft, vice and president and chief economist of Freddie Mac credited declining third quarter Gross Domestic Product figures for a slight drop in mortgage interest rates for the week ended November 2.

Nothaft said, "With mortgage rates down this week, we may see a spurt of refinancing by those who want to get out of ARMS that are scheduled to reset in the next year while interest rates are still comparatively low."

According to Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) was down 9 basis points to 6.31 percent for the week with fees and points unchanged at an average of 0.4 point. This rate is identical to the average interest rates for the 30-year mortgage one year ago.

The rate for five-year Treasury-indexed hybrid ARMs was 6.05 percent with 0.5 point. One week ago it was 6.14 percent with 0.6 points and one year ago it averaged 5.76 percent. The one-year Treasury-indexed ARM averaged 5.53 percent with an average 0.6 points, 7 basis points lower than one week ago but much higher than the 5.09 percent level of the same week in November 2005. Fees and points last week were 0.6 compared to 0.7 the previous week.

Nothaft also noted that some mortgage activity may be fueled by homeowners who are refinancing and taking cash out of their homes for remodeling or other needs rather than using home equity lines with the prime rate now over 8 percent.

Interest rates as reported by the Mortgage Bankers Association for the week ended November 3 were mixed but with little overall movement. The average contract interest rate for the 30-year fixed-rate mortgage was unchanged at 6.24 percent with points, including the origination fee, down from 1.09 to 1.08. The 15-year fixed rate mortgage was up 2 basis points to 5.96 percent with points decreasing from 1.03 to 0.97. The largest change recorded by MBA was for the one-year ARM which decreased from 5.93 percent to 5.89 percent, points dropping to 0.8 from 0.84.

All mortgage rates are for 80 percent loan to value originations.

Mortgage applications were up from the previous week; 8.8 percent on a seasonally adjusted basis and 8 percent unadjusted. Where activity had been running 20 to 30 percent below year-over-year figures in the second and third quarters of the year and 10 to 20 percent in recent weeks, the applications rate was only off 5 percent last week compared to the same week one year earlier.

Refinancing as a share of all mortgage activity increased to 46.3 percent from 45 percent the previous week and adjustable rate mortgages represented 26.4 percent of total applications compared to 25.9 percent the previous week.