The two mortgage interest rate surveys upon which we report each week showed big changes for long term rates during the week ended December 6 and 7, but the difference in the outcomes was striking. Two of the products tracked by Freddie Mac dropped to new two year lows while the Mortgage Bankers Association (MBA) reported substantial upward movement.

The most recent result of Freddie Mac's Primary Mortgage Market Survey for showed the 30-year fixed-rate mortgage (FRM) averaging 5.96 percent with 0.4 point. One week earlier it averaged 6.10 percent with 0.5 point. This is the lowest rate for the 30-year FRM since the week ended September 29, 2005 when it averaged 5.91 percent.



But the MBA Weekly Mortgage Applications Survey reported in increase in the 30-year FRM of 25 basis points to 6.07 percent with points, including the origination fee, increasing to 1.17 from 1.07.

According to Freddie Mac the 15-year FRM reached the lowest point since the week ended October 13, 2005 when it averaged 5.62 percent by dropping 11 basis points between November 29 and December 6, ending the week at 5.65 percent with 0.5 point.

MBA reported an increase for the 15-year FRM from 5.38 percent with 1.12 points to 5.72 percent with 1.01.

Five-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) which are only tracked by Freddie Mac had an average interest rate of 5.75 percent with 0.5 point compared to the previous week when it was at 5.92 percent also with 0.5 point. This is also a more than 2-year low. During the week ending October 27, 2005 the five-year averaged 5.63 percent.

Both surveys reported a small increase in the rate for one-year ARMs. Freddie Mac's survey showed an average interest rate of 5.46 percent with 0.6 point, compared to the previous week when it averaged 5.43 percent with 0.7 point. MBA reported an average contract interest rate of 6.31 percent with 0.97 point from 6.28 percent with 0.99 point.

Frank Nothaft, Freddie Mac vice president and chief economist commented, "House prices rose only 1.8 percent over the 12-months ending September 30th, the slowest rate of growth since the 12-month period ending March 31, 1995, according to the Federal Housing Finance Board's national house-price index. With lower consumer spending and personal income gains in October, interest rates on U.S. Treasury securities fell lower this week and mortgage rates followed.

"In addition, U.S. nonfarm productivity jumped by an annual rate of 6.3 percent in the third quarter, the most since 2003, while labor costs fell 2.0 percent. Greater efficiencies and lower costs ease pressures for companies to raise prices and offer the Federal Reserve (Fed) more leeway to reduce short-term rates. Currently, the federal funds futures market has almost a 100 percent probability that the Fed will lower rates in its December 11th policy committee meeting. These combined factors will likely diminish upward pressures on mortgage rates over the next few months."

And, of course as predicted, the Federal Reserve did cut the federal funds rate by one-quarter point Tuesday.

MBA also reported that the volume of mortgage applications increased 2.5 percent last week on a seasonally adjusted basis and 1.4 percent unadjusted from one week earlier. The volume was 14.2 percent above the activity reported during the same week in 2006.

Refinancing activity represented 57.6 percent of total mortgage applications compared to 56.0 percent one week earlier while the popularity of adjustable rate mortgages continued to fall. ARMs now represent only 9.4 percent of applications; one week earlier ARMs had a market share of 11.6 percent.