Mortgage rates backed off during the week ending July 13 and 14th, declining in every category tracked by both Freddie Mac and the Mortgage Bankers Association.

Frank Nothaft, Freddie Mac's vice president and chief economist upped the optimism factor by stating that the financial markets now expect only one more rate hike by the Federal Reserve this year which should take considerable pressure off of long term interest rates and keep mortgages rates relatively stable for the foreseeable future.

Freddie Mac's Primary Mortgage Survey placed the average interest rate for the 30-year fixed-rate mortgage last week at 6.74 percent. This was a .05 percent drop from the previous week although fees and points increased from 0.5 to 0.6. The 15-year fixed rate mortgage averaged 6.37 percent, down from 6.44 and fees and points also declined from 0.5 to 0.4.

The hybrid 5/1-year adjustable rate mortgage lost 6 basis points, averaging 6.33 percent for the week with fees and points down from 0.6 to 0.5. The big winner in the rate race was the one-year adjustable which dropped 8 basis points to 5.75 percent with fees and points also decreasing from 0.8 to 0.6.

The Mortgage Bankers Association's Weekly Mortgage Applications Survey showed similar results for the week. The average contract interest rate for 30-year fixed rate mortgages decreased from 6.81 percent to 6.73 while fees and points, including the origination fee, dropped from 1.13 to 1.06. The 15-year rate averaged 6.38 percent, only a modest drop from 6.40 the previous rate although fees and points decreased .15 to 1.02.

The biggest change again was recorded for the one-year ARM which was down 13 basis points to 6.28 percent. However, fees and points rose from 0.78 to 0.85.

Mortgage activity was off 4.6 percent on a seasonally adjusted basis from one week earlier but unadjusted the pace actually shot up 36.4 percent. Compared to one year ago, however, it was down 31.3 percent.

Refinances as a share of all mortgage activity were up to 35 percent - a full point from one week earlier - and adjustable rate mortgages enjoyed a slight increase to 29 percent of all mortgage applications.