Short term mortgage rates which had been rising, sometimes very sharply over the last few weeks fell a bit last week while long term rates were almost unchanged in the Freddie Mac Primary Mortgage Market Survey for the previous week.

The 30-year fixed-rate mortgage (FRM) moved up one basis point from 6.45 percent with 0.5 point to 6.46 percent, also with 0.5 point. Last year at this same time the 30-year FRM averaged 6.47 percent.

The 15-year FRM averaged 6.15 percent with 0.5 point, barely budging from the week ended August 30 when it averaged 6.12 percent also with 0.5 point. One year ago the 15-year FRM was at 6.16 percent.

The five-year Treasury-indexed hybrid adjustable rate mortgage (ARM) had an average contract interest rate of 6.32 percent with 0.6 point, again only a very modest change from the previous week when it carried a rate of 6.35 percent with 0.6 point. The current rate is 19 basis points higher than it was at this same time in 2006.

One-year Treasury-indexed ARMS showed the most dramatic change. After jumping 24 basis points to 5.84 percent with 0.8 point the previous week, the ARM settled down and gave back ten of those basis points, averaging 5.74 percent with 0.6 point.

"Over the past week, long-term mortgage rates were largely unchanged as the most recent economic news showed smaller increases than had been expected," said Frank Nothaft, Freddie Mac vice president and chief economist. "For instance, core personal consumption expenditure price index rose at an annualized rate of only 1.3 percent in the second quarter and July's consumer spending data showed a 1.9 percent gain in the core price index for the twelve months ending in July.

"In other news, the most recent Conventional Mortgage Home Price Index (CMHPI) release issued by Freddie Mac reported that on average, national house prices grew by 0.1 percent in the second quarter, the slowest quarterly house price growth since the fourth quarter of 1994. For the past 12 months house prices appreciated 3.3 percent, the slowest rate in 10 years."

The Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ended September 7 showed a dramatic drop in the 30-year FRM, from 6.42 percent with 1.09 points (including the origination fee) to 6.25 percent with 1 point.

The average contract interest rate for the 15-year FRM also had a healthy decrease from 6.10 percent with 1.16 points to 5.9 percent with 1.03 points.

The short term 1-year ARM decreased to 6.34 percent from 6.52 percent with points remaining unchanged at 0.93.

Mortgage application volume increased 5.5 percent from the previous week on a seasonally adjusted basis (with an additional adjustment to account for the Labor Day bank holiday) but was down 16.7 percent from that previous week and was up a scant 0.1 percent from the same week one year earlier.

Refinancing as a share of total mortgage activity was up to 42.1 percent from 41.4 percent the previous week. The market share of ARMs, however, continued to drop, representing 12.6 percent of total applications compared to 13.2 percent the previous week.