Interest rates dropped during the past week, continuing a weekly seesaw that began in July. 

According to the Freddie Mac's Primary Mortgage Market Survey for the week ended September 3, the 30-year fixed-rate mortgage (FRM) averaged 5.08 percent with 0.7 point.  A week earlier the average had been 5.14, also with 0.7 point.

The 15-year FRM dropped from 4.58 percent with 0.7 point to 4.54 percent with 0.6 point.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) which averaged 4.67 percent with 0.6 point during the week just ended, dropped to 4.59 percent also with 0.6 point this week.

One-year Treasury-indexed ARMs had an initial rate of 4.62 percent, down from last week when it averaged 4.69 percent.  Fees and points were unchanged at 0.6 point.

"Bond yields pushed mortgage rates slightly lower this week," said Frank Nothaft, Freddie Mac vice president and chief economist.  "Low mortgage rates are helping to keep housing very affordable.  Seven of the top eight most affordable months occurred during this year, according to the National Association of Realtors'® (NAR) Housing Affordability Index, which dates back to 1971.  As a result, pending sales of existing homes rose for the sixth straight month in July, a trend not seen since the NAR began reporting data in 2001.  Moreover, July's sales were the strongest since June 2007.

"Overall, inflation remains in check while certain sectors of the economy are experiencing some improvement.  The core price index on consumer expenditures, a key indicator tracked by the Federal Reserve, rose 1.4 percent in July from the same time a year earlier and represented the smallest 12-month increase since October 2003. Meanwhile, the manufacturing industry expanded for the first time in 19 months, according to the Institute of Supply Management."

Fannie Mae, which posted its weekly rates on Tuesday, reported across-the-board increases for its fixed-rate products.

The 30-year ARM averaged 4.91 percent during the week ended August 28 compared to 4.83 a week earlier.

Yields on the 15-year FRM rose from 4.20 percent to 4.27 percent and FHA/VA mortgage rates increased from 5.45 percent to 5.48 percent.

However, the rate for one-year ARMs declined.  The average yield last week was 2.92 percent; a week earlier it was 2.96 percent.

All Fannie Mae yields are posted net of servicing fees.