Maybe it is just temporary, but it looks like the worm - that is the mortgage interest rate version of it - has finally turned.

Freddie Mac's Primary Mortgage Market Survey for the previous week had some pretty heart-stopping data for those who may have hoped for continued low rates. However, this is similar to a pattern begun just about a year ago when rates moved into the high 6.80 percent range over a three month spring and summer period only to reverse and achieve a long term run in the 6.06-6.20 percent range. Who knows where it will go this time?



But it is the present that we are concerned about and that has the 30-year fixed-rate mortgage (FRM) moving up by 16 basis points to 6.37 percent. Not only is this the highest the 30-year has been since October 26, 2006, it is also the sharpest one-week movement in at least 18 months. Fees and points, at least, were unchanged at 0.4. This rate is still well below the average for the 30-year FRM one year ago which was 6.62 percent.

The 15-year FRM increased from 5.92 percent to 6.06 percent with fees and points unchanged at 0.4. This is the highest rate for the 15-year since February 1 this year. One year ago the 15-year rate was 6.23 percent.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 6.02 percent, a ten basis point increase from the previous week and also the highest level since February 1. Fees and points were unchanged at 0.5. One year ago the five-year ARM averaged 6.21 percent.

The one-year Treasury-indexed ARMs also increased by 16 basis points to average 5.64 percent with 0.6 point. The previous week fees and points had averaged 0.7. At this time last year, the 1-year ARM averaged 5.61 percent.

"Stronger than expected consumer confidence and recent comments from members of the Federal Reserve raised some inflation concerns in the market, causing it to lower expectations of a Fed rate cut this year. This helped push mortgage rates higher this week," said Frank Nothaft, vice president and chief economist. "We expect a gradual rise in mortgage rates over the remainder of the year with sales slipping further in the second half of the year. A gradual recovery returns toward the end of 2007 with modest increases in sales and construction during 2008."

"The slowdown in the housing market is evident in home sales. Over the first three months of 2006, interest rates for 30-year fixed-rate mortgages averaged 6.25 percent, which spurred 1.11 million (annualized) new home sales, and although mortgage rates in the first quarter of 2007 averaged a little lower than those in 2006, they fostered only 0.86 million in sales, or a 23 percent drop; existing home sales fell 7 percent."

The Mortgage Bankers Association reported a similar escalation in interest rates and a slowdown in overall mortgage application activity.

The Weekly Mortgage Applications Survey for the week ended May 24 reported an increase in the average contract interest rate for 30-year FRMs from 6.23 percent with 1.53 points (including the origination fee) to 6.32 percent with 1.41 points.

The 15-year FRM increased from 5.96 percent to 6.05 percent with points increasing to 1.27 from 1.24.

The one-year ARM, however, barely moved, increasing two basis points to 5.74 with fees and points nudging down from 1.1 to 1.09.

Mortgage application activity was down 7.3 percent on a seasonally adjusted basis from the previous week and 7.4 percent unadjusted. It was, however, up 17 percent compared with the same week one year ago.

Refinancing as a share of all mortgage activity was weak, decreasing to 39.7 percent from 42.3 the week before. The ARM share of mortgages fell still further, representing only 17.7 percent of all applications compared to 18.1 percent a week earlier.