Mortgage rates ratcheted down last week according to the results of Freddie Mac's Primary Mortgage Market Survey. Rates have generally been on an upward trajectory since the mid December.

Frank Nothaft, Freddie Mac vice president and chief economists said, "News of moderate employment gains in January led to a halt in the recent upward trend of interest rate movements. The 111,000 jobs added last month were fewer than had been anticipated, while the unemployment rate edged up unexpectedly."

The 30-year fixed-rate mortgage (FRM) averaged 6.28 percent last week compared to 6.34 percent a week earlier while the 15-year FRM was 6.02 percent, four basis points lower than the week ended February 1. Fees and points for both FRMs were unusually low at 0.3 compared to 0.4 the week before. This time last year the average contract rate for the 30-year FRM was 6.24 percent and the 15-year was 5.83 percent.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 5.99 percent with 0.4 point, down from the previous week when it was 6.04 percent with 0.6 point. The one-year Treasury-indexed ARM lost 5 basis points but fees and points remained unchanged at 0.7. One year ago the 5-year hybrid was at 5.89 percent and the one-year ARM averaged 5.34 percent.

Nothaft said he expects rates on the 30-year mortgage to average between 6.3 and 6.5 percent for the year but "The flat or increasing rate environment will likely cause the refinance share to contract gradually. In addition, the dollar volume of home equity cashed-out will also retreat from the record level of $314 billion set in 2006 to around $230 billion this year."

The Mortgage Bankers Association released its Weekly Mortgage Applications Survey for the week ending February 9 on Wednesday. That survey found the contract interest rate for a 30-year FRM bucked the trend, increasing 1 basis point to 6.24 percent with points, including the origination fee, decreasing to 1.06 from 1.09. The 15-year FRM decreased to 5.94 percent from 5.96 percent with points increasing from 1.1 to 1.13 and the one-year ARM also decreased to 5.80 from 5.84 but points bumped up from 0.78 to 0.84.

Mortgage application volume increased 1.5 percent on a seasonally adjusted basis from one week earlier and was 4.5 percent higher unadjusted. Even better, activity was up 10.9 percent from the same week in 2006.

Refinancing as a share of all mortgage activity was unchanged at 46.1 percent but the share of mortgages held by the adjustable rate varieties decreased to 21.2 percent from 22.3 percent a week earlier.