Fixed mortgage rates fell sharply in the past week, with the average conforming 30-year fixed mortgage rate now 5.98 percent — a 41 basis-point drop from last week. According to Bankrate.com’s weekly national survey of large lenders, the average 30-year fixed mortgage has an average of 0.38 discount and origination points. The average 15-year fixed rate mortgage popular for refinancing revisited a five week low of 5.46 percent, while the average jumbo 30-year fixed rate declined modestly to 7.43 percent.

Adjustable mortgage rates were up sharply for the second week in a row, with the average 5/1 ARM jumping nearly one-quarter percentage point to 6.44 percent. With ARM rates sitting so high relative to fixed-rate mortgages, it’s no wonder that the Mortgage Bankers Association reported this week that ARM share of overall application activity has fallen to near-record lows. For the week ended March 14, the MBA reported Wednesday that ARMs represented just 7.9 percent of overall application activity versus nearly 16 percent just one week earlier. Despite the drop in fixed-rate mortgages, volatility continues to rule the day as markets swing wildly in one direction one day, and just as wildly in the other the next. Bankrate.com’s Holden Lewis reports:

On Tuesday, the day the Federal Reserve cut short-term interest rates by three-quarters of a percentage point, Dowling got an initial rate sheet late in the morning, and then four over the next six hours. “A total of five different rates,” he says. “Depending on what time of day you called me, I could have given you five different interest rates.”

Dan Green, an independent originator with Mobium Mortgage and a well-known industry personality on the consumer side of the business, said last week that borrowers looking to buy now may as well buy now. “Now is a good time to buy — not because home prices are flat or because sellers are willing to make like Monty Hall — but because none of us mortgage guys can predict what the mortgage market will look like later,” he wrote last week. Sources on the secondary market side of the business that speak with Housing Wire have suggested recently that rates are likely uniformly headed upward over the course of the rest of this year. In a recent story looking at Fannie Mae and Freddie Mac, one source suggested to HW that rates might actually reach as high as 10 percent before 2008 is out.