Long term mortgage interest rates showed a healthy decline during the previous week according to the Primary Mortgage Market Survey released by Freddie Mac. The one-year ARM, however, shot up in this report as it had one week earlier in the Mortgage Bankers Association survey.

The 30-year fixed rate mortgage (FRM) averaged 6.45 percent with 0.5 point during the week compared to an average of 6.52 percent with 0.4 point the previous week. This is the lowest rate for the 30-year since May 31 when the average was 6.42 percent. One year ago this product had an average rate of 6.44 percent.

The 15-year FRM averaged 6.12 percent and 0.5 point, a slight dip from last weeks 6.18 percent also with 0.5 point. One year ago the 15-year was at 6.14 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) increased to 6.35 percent with 0.6 point, up slightly from its average of 6.34 percent and 0.6 point one week earlier. This same week in 2006 this product averaged 6.11 percent.

Last week the one-year ARM skyrocketed 67 basis points in the MBA survey and this week Freddie Mac reported that the one-year was up 24 basis points to 5.84 percent. Fees and points were also up from 0.6 to 0.8. Last year the one-year ARM averaged 5.59 percent.

"Interest rates on conforming long-term fixed-rate mortgages declined slightly, while rates on one-year adjustable rate mortgages increased by about a quarter of a percent," said Frank Nothaft, Freddie Mac vice president and chief economist. "The increase in ARM rates is consistent with movement of the yields on short-term Treasury securities, which have exhibited higher volatility recently due to market uncertainties.

"In other news, new home sales defied consensus expectations and rose in July to 870 thousand units, led by a 22 percent increase in the Western region. Existing home sales fell, however, though by less than the market had forecasted, to 5.75 million units, with the decline limited to the Midwest region."

The MBA's Weekly Mortgage Applications Survey for the week ended August 31 reported that the average contract interest rate for the 30-year FRM increase a single basis point to 6.42 percent with points, including the origination fee, dropping from 1.48 to 1.09.

The 15-year FRM was unchanged at 6.10 percent with points down slightly to 1.16 from 1.19.

Mortgage applications activity was up 1.3 percent on a seasonally adjusted basis from one week earlier but was down 0.2 percent unadjusted. Activity was up 10 percent from the same week in 2006.

The refinance share of mortgage activity increased to 41.4 percent of total applications from 40.4 percent the previous week. The adjustable-rate mortgage share of activity decreased to 12.6 from 15.0 percent of total applications from the previous week. This is probably the lowest market share for the one-year adjustable rate mortgage in the two plus years we have been keeping track.