Fixed-rate mortgages recorded double digit declines this week, according to Freddie Mac's weekly survey.

The 30-year fixed mortgage rates averaged 6.26%, down 11 basis points from last week while 15-year fixed rates were off 13 basis points to 5.78%.

Adjustable-rate mortgage rates were also lower with 5-year hybrid ARMs at 5.80% compared to 5.82% previously, and one-year ARM rates lower by seven basis points to 5.10%. 

"Mortgage rates fell this week amid market speculation that the Federal Reserve (Fed) may not raise the overnight bank-lending rate this year after all, " Freddie Mac's Chief Economist Frank Nothaft said. 

Some of the factors motivating the change in market perceptions this week included retail sales for June rising at the slowest pace since February and consumer sentiment in July holding at low levels not seen since 1980."  

Since peaking at 6.45% on June 26, the 30-year rate has dropped 19 basis points.  It also perked up refinancing activity off its lows of 1212 in mid-June to 1475 for the week ending July 11, up 22%. 

Given this week's improvement, application activity is expected to record further modest gains this week. Levels, however, remain low relative to rate levels and will keep prepayment speeds slowing. 

Currently, speeds are seen down about 10% to 15% in July from June with largest percentage declines showing in 5.5s coupons and higher. 

August speeds are expected to slow close to 10% from July's estimates.  Contributing to this is one less collection day in August. 

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