Fixed-rate mortgages (FRMs) hit the highest levels of 2008 during the week ended July 24 according to Freddie Mac's Primary Mortgage Market Survey.

30-year FRMs averaged 6.63 percent with 0.6 point for the week, compared to 6.26 percent with 0.6 point a week earlier and the 15-year FRM averaged 6.18 percent with 0.6 point, up from 5.78 percent the previous week.

Shorter-term adjustable rate mortgages (ARMs) also set records for the year. The five-year Treasury-index hybrid ARM averaged 6.16 percent with 0.7 point, an increase of 36 basis points in a week. Fees and points during the week ended July 17 averaged 0.6.

One-year Treasury-indexed ARMs carried an average contract interest rate of 5.49 percent this week with a 0.5 point, up from last week when it averaged 5.10 percent with 0.6 point.

"Market concerns about rising inflation and the greater probability that the Federal Reserve (Fed) will raise short-term rates this year all combined to push mortgage rates higher this week," said Frank Nothaft, Freddie Mac vice president and chief economist. "Some of the key drivers to these concerns were consumer prices jumping 1.1 percent (annualized) in June ' the largest increase since September 2005 on a year-over-year basis ' coupled with consumer prices growing at a 5.0 percent clip (on a year-over-year basis), the strongest since February 1991.

"Additionally, home prices fell 4.8 percent between May 2007 and 2008, according to the Office of Federal Housing Enterprise Oversight's monthly house price index. And new construction of one-unit homes fell to 604,000 units (annualized) in June, the slowest pace since January 1991."

Results of the Mortgage Bankers Association's weekly rate and application survey for the week ended July 25 showed fixed-rates down with the 30-year FRM averaging 6.46 and the 15-year FRM averaging 5.98 percent compared to the prior week's averages of 6.59 percent and 6.10 percent respectively.

The one-year ARM was up to 7.25 percent from 7.16 percent a week earlier.

The volume of mortgage applications dropped 14.1 percent when seasonally adjusted. The volume was down 30.3 percent when compared to the same week in 2007.

Applications for refinancing made up 35.2 percent of the market, down from 39.4 percent a week earlier while the market share of the one-year ARM fell to 7.3 percent from 8.5 percent the week before.