Mortgage interest rates reversed the stunning increases seen the previous week, erasing almost all of the gains seen in fixed rate products according to Freddie Mac's weekly Primary Mortgage Market Survey for the week ended October 23.

"Long-term mortgage rates fell this week amid news of tame inflation and a weaker housing market," said Frank Nothaft, Freddie Mac vice president and chief economist.  "Consumer prices were unchanged in September and core prices, which exclude food and energy products, rose by only 0.1 percentage point, all below the market consensus.  On a year-over-year basis growth in core consumer prices remained at a 2.5 percent clip."

During the week ended October 16 the interest rate on 30-year fixed rate mortgages (FRMs) jumped 52 basis points, a one-week change last seen in 1987.  The 15-year FRM was up 51 basis points. 

During the most recent week the 30-year dropped from 6.46 percent to 6.04 percent with fees and points unchanged at 0.6.

The 15-year FRM this week averaged 5.72 percent with an average 0.6 point, down from last week when it averaged 6.14 percent.  

Adjustable rate mortgages (ARMs) had shown far less volatility during the week ended October 16 with the five-year Treasury-indexed hybrid adjustable-rate mortgage increasing 24 basis points and the one-year Treasury-indexed ARM up a single basis point.  This past week the five-year averaged 6.06 percent compared to 6.14 percent, both with an average of 0.6 point and  the one-year ARM averaged 5.23 percent this week with an average 0.5 point, up from last week when it averaged 5.16 percent with 0.6 point. 

Nothaft's statement continued, "New construction on one-family homes fell 12 percent in September to an annual rate of 544,000 homes, the lowest since February 1982.  One-unit housing starts are now 70 percent below its peak set in January 2006, according to the Department of Commerce.  Meanwhile, homebuilder confidence reached an all-time record low in October since the National Association of Homebuilders first began polling in January 1985."