It was nice while it lasted but mortgage rates last week reversed a four week downward trend and made up much of the ground they lost a week earlier. However, they still remained well below where they were at the end of 2007 when the four-week slide began.

Freddie Mac's Primary Mortgage Market Survey for the week ended January 31 reported that the interest rate on the average 30-year fixed-rate mortgage (FRM) increased 20 basis points to 5.68 percent from one week earlier. Fees and points were unchanged at 0.4. 30-year rates had fallen steadily since the week ended December 27 when the average was 6.17 percent.

The 15-year FRM averaged 5.17 percent with 0.4 point, up from the previous week's average of 4.95 percent with 0.4 point. The average rate on December 27 was 5.79 percent.

One-year Treasury-indexed ARMS increased by 6 basis points to 5.05 percent with fees and points unchanged at 0.7. Even with this upward move the one-year is still 48 basis points below the December 27 mark.

"Mortgage rates ended their four-week descent this week, with average rates on 30-year and 15-year fixed rate mortgages coming up by about 0.2 percentage points," said Frank Nothaft, Freddie Mac vice president and chief economist. "This increase completely erased the previous week's decline. The movement in fixed mortgage rates was broadly consistent with the movements of Treasury bonds over the week.

"Reinforcing the Fed's resolution to thwart a recession, the Federal Open Market Committee announced another cut in the target federal funds rate by half of a percentage point in their most recent scheduled meeting. This came on the heels of the Fed's rate cut of three-quarters of a percentage point the previous week, and the shaping-up of a fiscal stimulus package by Congress and the White House. This cut was in line with market expectations."

The Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey reported that rates were mixed during the week ended February 1, with long term rates increasing while the one-year ARM lost ground.

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.61 percent from 5.60 percent, with points, including the origination fee, decreasing to 0.98 from 1.06.

The average contract interest rate for 15-year fixed-rate mortgages increased to 5.09 percent from 5.04 percent, with points decreasing to 0.92 from 1.12.

The average contract interest rate for one-year ARMs decreased to 5.62 percent from 5.70 percent, with points remaining unchanged at 0.97.

The volume of mortgage applications reported by survey respondents continues to be much stronger than this time last year and gets a little better each week. This past week the Market Composite Index which measures this volume increased 3.0 percent from the previous week on a seasonally adjusted basis and 4.4 percent unadjusted. Application volume was 73.2 percent higher than the same week in 2007. These increases, however, might be partially accounted for by applicants submitting multiple requests because of newly tightened underwriting standards.

Applications to refinance mortgages fell back slightly from 73.0 percent of all applications the previous week to 69.2 percent and, perhaps reflecting the slight decline in rates, the market share of ARMs increased to 8.8 percent from 8.6 percent.