For the third week in a row mortgage rates declined according to both Freddie Mac and the Mortgage Bankers Association. The reductions each week have not been large, but they have returned rates back to those not seen since late July.

Freddie Mac's Weekly Primary Mortgage Market Survey for the week ended September 1 found average rates for a 30-year fixed mortgage to be 5.71 percent, compared to 5.77 for the week of August 17. Fees and points did increase from 0.5 to 0.6. The 15-year fixed rate was down from 5.35 to 5.32 percent and fees and points declined 0.1 to 0.5. The 5/1 ARM was unchanged at 5.30 percent as were frees and points at 0.6. The 1-year ARM was the big winner, down 8 basis points to 4.48 percent. Fees and points remained unchanged at 0.7.


The Mortgage Bankers Association Weekly Mortgage Applications Survey for the week ended September 2 echoed Freddie Mac's report. 30-year fixed rate mortgages decreased to 5.64 percent from 5.73 percent for the previous week with points dropping from 1.19 to 1.13. MBA's information on fees and points includes origination fees and all statistics are for 80 percent LTV loans.

15-year fixed rate mortgages decreased a (relatively) whopping 18 basis points to 5.18 percent from one week earlier. Points also decreased but much more modestly from 1.19 to 1.14. 1-year ARMS also dropped to 4.81 percent from 4.88 percent and points decreased very slightly from 1.06 to 1.05.

Most economists are saying that interest rates probably will, at a minimum stabilize but more likely decrease in light of the incredible devastation wrought by Hurricane Katrina. While Federal Reserve actions have had little impact on mortgage rates in recent months, the Board is expected to pass on additional incremental rate increases at its meeting next week and fears of the spreading impact of Katrina are likely to discourage increases in longer-term interest rates.

The Mortgage Bankers Association reported that mortgage loan applications bumped up 6.8 percent on a seasonally adjusted basis last week and 5.4 on an unadjusted basis. Applications improved 11.8 percent over the same week in 2004, but this improvement, was running well below the 20 percent plus increases in applications noted earlier in the year.

Refinancing activity represented 44.8 percent of all mortgage applications compared to 43.8 percent a week earlier and the ARM share of activity decreased to 26.5 percent from 27.8 the previous week.