It's a strange paradox of the mortgage industry that bad economic news generally tends to push mortgage rates lower, and improves the demand outlook for originators; confounding that general rule, of course, are fears about inflation, which can wreak havoc on mortgage rates in precisely the opposite direction. In the past week, investor fears about inflation eased somewhat, while bad economic news tended to outweigh the good -- and fears over the future of the GSEs abated as well. It's a complex mix that helped push mortgage rates lower on the whole, according to a weekly rate survey released Thursday morning by Freddie Mac (FRE); a 30-year fixed-rate mortgage averaged 6.52 percent with an average 0.7 point for the week ending July 31, the GSE said. That compares to an average of 6.68 percent one year ago. Fifteen-year fixed-rate mortgages averaged 6.07 percent with an average 0.6 point, down from last week's 6.18 percent and below the 6.32 percent average recorded one year ago. Adjustable rate mortgages saw rates fall as well, with five-year Treasury-indexed hybrid ARMs dropping 9 basis points to 6.07 percent this week; one-year hybrid ARMs saw rates fall a whopping 22 basis points, as well. "Mortgage rates moved lower this week as a drop in commodity prices eased market concerns over inflation pressures," said Frank Nothaft, Freddie Mac vice president and chief economist. "For instance, the Department of Energy reported that gasoline prices were the lowest since the end of May, and oil prices were at levels not seen since early May." Which is true. But it's also true that investors became comparatively less concerned about the future of Freddie and Fannie Mae (FNM) after Congress passed sweeping housing legislation that was signed into law by President Bush yesterday. Last week, HW's sources suggested that "investor paranoia" was part of the reason rates had risen so sharply; and, of course, Nothaft isn't likely to comment on the issue. Mix in a smattering of other economic news that slanted towards the negative, and mortgage rates had just the elixir needed to ease things us. "While the months of supply for existing single-family homes for sale rose to 11 months in June, the supply of new homes fell for the second consecutive month to 7 months," said Nothaft. "Further, the seasonally-adjusted U.S. homeownership rose slightly from 68.0 percent in the first quarter of this year to 68.1 percent in the second, yet still below the 68.3 percent set in the second quarter of 2007." Where rates head next is pretty much anyone's guess, HW's sources suggested; but most said that easing fear over inflation was likely temporary. For more information, visit http:/ Disclosure: The author was long FRE when this story was published; other indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.