Despite rising interest rates, theres good news on the mortgage front. Those rates are still at historically low levels. And borrowers who hold adjustable-rate mortgage (ARM) loans that are increasing in rates and payments can refinance with a secure fixed-rate mortgage at a very favorable rate. And low-rate mortgage financing is still available for home purchases.

On May 1, the average rate for a 30-year, fixed-rate mortgage is 6.58 percent. Thats the highest rate for a 30-year fixed-rate mortgage since July, 2002. And it will probably edge higher in coming months. A particularly popular option for borrowers who want to exchange their ARM with a fixed-rate loan is the 15-year fixed mortgage. The average rate for these loans is now 6.21 percent.

Mortgage rates are drifting upward following the release of the recent Consumer and Producer Price Indexes that came in at the upper end of market expectations for inflation, said Frank Nothaft, chief economist for Freddie Mac, a major buyer of existing home mortgages. Even though lenders are offering greater interest rate discounts on ARMs, the rate savings has declined relative to fixed-rate mortgages. The ARM share of applications has dipped to 32 percent. If the Fed continues to raise short-term rates, the ARM share will likely decline further, Nothaft said.

Another popular option for borrowers wanting more protection from rising mortgage payments but still need a low interest loan is the five-year Hybrid ARM. With these mortgages, the rate is fixed for the first five years, then reverts to a one-year ARM for the remainder of its term. The average rate for these mortgages is now 6.21 percent. The above rates do not include the add-on fees known as points. These now average about 0.5 percent of the loaned amount.

An increasing number of mortgage applicants are refinancing an ARM loan to hold the line on payment increases. The individual needs and capabilities of mortgage applicants vary greatly. Its best to discuss those needs with a knowledgeable mortgage counselor before applying for a specific type of mortgage.