Interest rates!

Just because the fed cut interest rates does not mean lower interest for mortgages, see article below.

NEW YORK (CNNMoney.com) -- The 30-year mortgage rate surged this week, following the Fed's half-point rate cut and the rise in long-term Treasury bonds yields.

Mortgage finance firm Freddie Mac reported Thursday that 30-year fixed-rate mortgages averaged 6.46% this week. That's up from 6.06% last week and above 6.26% the rate this time last year.

"Long-term mortgage rates followed long-term Treasury bond yields higher this week, pushing fixed-rate mortgages up to levels of two weeks ago," said Frank Nothaft, Freddie Mac (FRE, Fortune 500) vice president and chief economist.

Rates on 15-year fixed-rate mortgages rose to 6.19% from 5.72% last week. A year ago, the rate was 5.91%.

Nothaft also said that the Fed's half-point rate cut is likely to keep short-term interest rates low, which may keep initial interest rates on ARMs near current levels.

The five-year adjustable-rate mortgage rose to 6.36%, from 6.06% last week. A year ago, the rate was 5.98%.

The rate on a one-year adjustable-rate mortgage increased to 5.38% from 5.23% last week. At this time last year, the rate was 5.57%.

The struggling housing market continues to be buffeted by more bad news. Home prices fell in August for the 25th consecutive month and prices in 10 major markets plunged a record 17.7% year over year, according to the S&P Case-Shiller Home Price index (full story).

Sales of newly constructed homes rose in September, according to the U.S. Census Bureau, inching up 2.7% from August to an annualized rate of 464,000 (full story). But sales were still a third lower than year-ago levels.

In September, the government took control of the mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac with a rescue plan that could inject $200 billion into them to keep them afloat.