The average 30-year fixed mortgage interest rate fell from 3.39 percent to 3.37 percent with an average 0.7 points, Freddie Mac said.
A year earlier, interest rates for 30-year, fixed-rate loans were at 4.11 percent.
For 15-year loans, interest rates fell from 2.7 percent to 2.66 percent with an average 0.6 points. A year ago, 15-year loan rates averaged 3.38 percent.
Average interest rates for five-year adjustable-rate mortgages rose from 2.73 percent in the week to 2.75 percent. In the same week of 2011, rates for five-year ARM contracts stood at 3.01 percent.
The average interest rate for one-year ARM contracts was 2.6 percent in the week with 0.4 points, up from 2.59 percent in the previous week.
Rates a year ago for one-year ARM contracts averaged 2.94 percent.
"Mortgage rates remained more or less unchanged this week as home construction builds up steam. Construction on single-family homes jumped to an annualized rate of 11 percent in August, the strongest pace since August 2008. Over the first nine months of the year, single-family starts were 23 percent higher than the same period last year," said Freddie Mac vice president and Chief Economist Frank Nothaft in a statement.
"Moreover, homebuilder confidence rose for the sixth consecutive month in October to the highest level since June 2006," Nothaft said.