Mortgage rates showed substantial declines for the previous week according to Freddie Mac's Primary Mortgage Market Survey. Similar drops were recorded by the Mortgage Bankers Association (MBA) in its Mortgage Applications Survey for the week ended October 26.

Freddie Mac reported that the 30-year fixed-rate mortgage (FRM) averaged 6.33 with 0.5 point which was six basis points lower than both the previous week and the average rate for the same time period in 2006.

The 15-year FRM averaged 5.99 percent with 0.6 point compared to the previous week when it averaged 6.08 percent also with 0.6 point. One year ago the average rate was 6.10 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) had an average contract interest rate of 6.03 percent with 0.5 point. One week ago the rate was 6.11 percent also with 0.5 point and one year ago it was 6.14 percent.

The one-year Treasury-indexed ARM was down 10 basis points to 5.66 percent with 0.6 point. In October 2006 the average rate was 5.60 percent.

Frank Nothaft, Freddie Mac vice president and chief economist commented on the survey; "Market concerns about slower economic growth over the next few months allowed mortgage rates to drift lower from last week. How much of a drag the housing slump will be on the economy remains unknown. Additionally, recent reports suggest some regional manufacturing weakness in October.

"Meanwhile, sales of existing single-family homes in September dropped to the slowest pace in nearly a decade - since January 1998 - reflecting the effects of the credit tightening that occurred in August."

The MBA survey showed similar rate decreases. The 30-year FRM decreased to 6.15 percent from 6.21 percent with points, including the origination fee, dropping to 1.05 from 1.13.

The average contract interest rate for 15-year FRMs declined seven basis points to 5.79 although points increased slightly from 1.06 to 1.10.

The one-year ARM averaged 5.93 percent with 0.93 point compared with an average of 6.10 percent with 0.92 point the week before.

The volume of mortgage applications increased 3.8 percent on a seasonally adjusted basis and 3.6 on an unadjusted basis. Volume was 19.5 percent higher than the same week in 2006.

The percentage of overall mortgage applications intended for refinancing increased to 49.6 percent last week from 47.0 the week before and the market share of adjustable rate mortgages increased from 14.2 percent to 14.7 percent.