While mortgage activity was down sharply - and expectedly - during the pre-Christmas week at least one mortgage expert saw reason to hope for a busy and profitable New Year.

Frank Nothaft, Freddie Mac vice president and chief economist, in releasing the results of the weekly Primary Mortgage Market Survey for the week ended December 21, said, "What is interesting to note is that the 30-year fixed-rate mortgage (FRM) this week is 1/8 of a percentage point lower than the 30-year FRM was at this time last year. This may result in more mortgage activity in the new year, and indeed we have seen a spike in refinancing over the past few weeks as rates have come down. Borrowers who have ARMs that are scheduled for a rate adjustment in 2007 may choose to refinance over the next several months to take advantage of the low fixed rates that are currently available."

Those rates were up slightly from the previous week with the 30-year FRM priced at an average of 6.13 percent with an average 0.4 point compared to 6.12 percent with 0.4 point for the week ended December 14. The 15-year FRM was up 3 basis points to 5.89 percent with 0.4 points. One year ago the 15-year averaged 5.79 percent.

Five-year Treasury-indexed adjustable rate mortgages (ARMs) averaged 5.96 percent with one-half point; the previous week the average was 5.92 percent with 0.6 point. The one-year ARM was down a single basis point to 5.44 percent and fees and points went from 0.8 to 0.6. This same week in 2005 the 5/1 was at 5.82 percent and the one-year averaged 5.22 percent.

The Mortgage Bankers Association (MBA) Weekly Mortgage Applications Survey for the week ended December 22 clearly showed that consumers had things other than mortgages on their minds. The Market Composite Index, a measure of mortgage loan application volume, was down 14.2 percent on a seasonally adjusted basis from a week earlier. Unadjusted the pace was down 15 percent from the previous week but was still running 16.6 percent higher than the same pre-Christmas week in 2005.

Average interest rates were up from the previous week with the 30-year FRM at 6.12 percent with points, including the origination fee, at 0.96 compared to 6.10 percent with 0.93 points a week earlier.

The average contract interest rate for 15-year fixed-rate mortgages increased to 5.84 percent from 5.82 percent, with points increasing to 1.06 from 0.99. One-year ARMs increased to 5.87 percent from 5.82, with points decreasing to 0.80 from 0.83.

All rate information is for 80 percent loan to value mortgage originations.

Refinancing continued to be a strong factor although it was down slightly from the previous week. Last week the refinance share of mortgage activity was 48.8 percent of total application compared to 50.8 percent the week ending December 15. The ARM share of applications decreased to 23.1 percent from 23.6 percent. This is the lowest share of the market that ARMs have had since October 2003.