Mortgage rates fell modestly this week, one week after surging to their highest levels in the past year.

The average 30-year fixed-rate mortgage fell 7 basis points, to 6.7 percent. A basis point is one-hundredth of a percentage point.

The average 15-year fixed -- a popular option for refinancing -- fell 10 basis points, to 6.22 percent. The average jumbo 30-year fixed fell 3 basis points, to 7.65 percent.

The one-year adjustable-rate mortgage rose 2 basis points, to 6.26 percent. The popular 5/1 ARM slid 13 basis points, to 6.35 percent.

Mortgage applications fell sharply for the week ending July 25, according to the Mortgage Bankers Association. Applications plunged a seasonally adjusted 14.1 percent from the week before, the slowest pace of activity since December 2000.

Refinancing activity fell by 22.9 percent. Applications for new purchases decreased by 7.8 percent.

The MBA also reported that fixed-rate mortgages are growing in popularity in the United States. Fixed-rate loans (not including interest-only loans) made up 63.6 percent of first mortgages issued in the second half of 2007, compared to 53.4 percent in the first half of the year.

In other housing news, May home prices in 20 U.S. cities fell by a record 15.8 percent compared to the previous year, according to the widely watched S&P/Case-Shiller Home Price Index. It was the 22nd straight month that the index has reported a decline in U.S. house values.

Recently, Congress passed a housing bill intended to stanch the flood of U.S. foreclosures and spur a housing turnaround. President Bush signed the bill into law July 30.

-- Chris Kissell

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