After something of a summer surge, the average interest rate on the 30-year fixed fell to 5.08 percent with an average 0.7 point for the week ending Sept. 3, from 5.14 percent the previous week, according to Freddie Mac

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Last year at this time, the 30-year FRM averaged 6.35 percent.

“Bond yields nudged mortgage rates slightly lower this week, with the fixed-rate mortgage rates falling to three month lows,” said Frank Nothaft, Freddie Mac vice president and chief economist.

But FBR's Paul Miller pegs it more on the government buying mortgage backed securities. "If the Fed backed out of a liquidity stance, treasuries would scream," says Miller. "I think the government will try to keep it right around 5 percent."

That's because the government needs low mortgage interest rates to support a housing recovery, especially now, as the first time home buyer tax credit expires Nov. 30. But will rates go any lower? Or did we all miss the boat last spring, when rates hit record lows?

"Treasury yields and mortgage rates have pulled back on concerns about the sustainability of the economic recovery, particularly with household income and consumer spending weak," says Bankrate.com's Senior Financial Analyst Greg McBride. "However mortgage rates are very dependent on the Fed's purchases of $300 billion in Treasury debt that will expire in October and $1.25 trillion in mortgage bond purchases that will expire at year-end. Unless the economy stumbles, we're likely to see higher rates in the fourth quarter."

So is that a double whammy to housing? The tax credit expires and the 30-year fixed edges up?

Methinks me smells more potential government intervention. Unless of course the Administration doesn't think housing is the key to overall economic recovery. There's an argument being made there as we speak (not my argument, but an argument). Anyway, it's something to watch.

Oh, and for those of you asking on yesterday's blog about what to do with Fannie and Freddie stock, given the Mortgage Bankers proposal to change the system: Remember, this was the first of many proposals.

The Obama Administration is going to come out with its own proposal in the 2011 budget, which rears its ugly head in February. Any change in Fannie and Freddie is still at least a year away.

That said, Paul Miller doesn't think you should own it regardless. Miller, who keeps an "underperform" rating on the shares, calls Fannie and Freddie an "accounting gimmick" because if they nationalized it fully they would have to put the losses on a government accounting sheet...not that it's not really there already, but by leaving the stock out there and not nationalizing, they don't have to consolidate debt.

Says Miller, "Their stock has no value. I would get out of it."

Great Real Estate Slideshows on CNBC.com including:

• 10 Most Affordable Metro Areas
• America's Coolest Beach Homes
• Million Dollar Homes Across America

Questions?  Comments?