Soothing news about inflation was reflected by declining mortgage interest rates last week, although Freddie Mac and the Mortgage Bankers Association were in substantial disagreement about the scale of the changes.

According to Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) averaged 6.17 last week with an average 0.5 point. During the week ended April 12 the 30-year averaged 6.22 percent with 0.4 point.

The 15-year FRM declined one basis point to 5.89 percent while fees and points increased from 0.4 to 0.5.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) slipped very slightly from 5.93 percent with 0.5 point to 5.92 percent with 0.6 point. The one-year Treasury-indexed ARM averaged 5.45 percent with 0.7 point compared to 5.47 percent with 0.5 point the previous week.

Frank Nothaft, Freddie Mac vice president and chief economist said, "Mortgage rates slipped following the latest reports of moderation in inflation rates from the core producer price and consumer price indexes. Excluding food and energy, the core inflation rate for consumer prices rose 2.5 percent year-over-year, the smallest annual growth since May 2006. This helped calm markets and brought mortgage rates down."

"The low mortgage rates that have prevailed so far in 2007 may have a stabilizing effect on the housing sector. Both housing starts and new permits for March came in above expectations, but February's housing starts numbers were revised downward. Because of weather-induced fluctuations in housing statistics, we will have to see what the numbers show later in the Spring to gauge whether the March readings are indeed a signal of market turnaround."

Whether or not it was a direct effect of the slight decline in rates, mortgage application activity was up a bit from the week before and continued the substantial recovery from the pace a year earlier. According to the Mortgage Bankers Association (MBA) Weekly Mortgage Applications Survey for the week ending April 20, applications were up 3.6 percent on a seasonally adjusted basis and 4.1 percent unadjusted from a week earlier. Activity was up 18.2 percent compared to the same week in 2006.

Refinancing as a share of total volume decreased to 43.3 percent, 0.2 lower than a week earlier and ARM applications were up 0.2, a tiny improvement amidst the general downward spiral in the popularity of that product.

MBA's survey of rates found that the 30-year FRM decreased to 6.13 percent from 6.22 percent while points, including the origination fee, increased from 1.22 to 1.32. The average contract interest rate for a 15-year FRM was 5.82 percent with 1.27 points compared to 5.92 percent with 1.18 points the week before. The one-year ARM dropped ten basis points to 5.79 percent. Points were up a slight 0.03 to 0.73.