Mortgage rates see big drop

NEW YORK (CNNMoney.com) -- Mortgage rates reversed their recent upward trend, taking a sizable drop last week, according to a survey released Thursday.

The 30-year fixed-rate mortgage (FRM) averaged 6.31 percent for the week ending Nov. 2, down from 6.40 percent, according to Freddie Mac's (Charts) Primary Mortgage Market Survey. A year ago, the 30-year FRM averaged the same level: 6.31 percent.

The 15-year FRM averaged 6.02 percent this week, down from 6.10 percent last week. A year ago, it averaged 5.85 percent.

Rates for five-year adjustable-rate mortgages (ARMs) came in at 6.05 percent this week, down from 6.14 percent last week. A year ago, they averaged 5.76 percent.

One-year ARMs averaged 5.53 percent, down from 5.60 percent last week. A year ago, the one-year ARM averaged 5.09 percent.

"Lower-than-expected third quarter gross domestic product [GDP] figures helped to put a damper on rising rates this week," said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement. "With mortgage rates down this week, we may see a spurt of refinancing by those who want to get out of ARMs that are scheduled to reset in the next year while interest rates are still comparatively low.

"We are also seeing a higher number of homeowners who are taking cash out of their homes for home improvement or other needs rather than opting for a prime rate home equity loan now that the prime rate is over 8 percent."

Beware the mortgage time-bomb That ridiculously low-rate ARM seemed like such a good idea at the time. But now, payments will be coming due in a big, big way.

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