Mortgage rates remain almost flat this week, according to Freddie Mac's survey. 

The 30-year fixed mortgage rate averaged 6.37% compared with 6.35% the pervious week, while 15-year fixed-rate mortgages were one basis point lower at 5.91%. 

Adjustable rate loans were also mixed. Five-year hybrid ARMs were up four basis points to 5.82% and  one-year ARM rates holding unchanged at 5.17%. 

Application activity is not anticipated to show much response to the stable rates this week. In the week ending July 4, the Mortgage Bankers Association reported a close to 9% increase in the Refinance Index to 1379. However, it's uncertain how much noise might be around the number as the week included the July fourth holiday. 

In a note from Deutsche Bank Securities MBS group, analysts pointed out that despite the increase, this was the fourth straight week that the Refinance Index had remained below 1400, something last seen in 2002. 

Given the sharp drop in the refinancing activity over the past several weeks (down 43% in the past nine weeks) and the tight lending conditions, housing weakness and low consumer confidence, upcoming prepayments are seen slowing noticeably. Given this, Deutsche Bank analysts favor the up-in-coupon trade in 30-years, specifically 6.5s.

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