Fears over a mortgage meltdown in the United States have been quelled somewhat by news that mortgage rates on fixed-rate loans have fallen.

The 30-year fixed-rate mortgage averaged 6.40% for the week ending Aug. 28, which has indicated almost a 7% fall. The mortgage averaged 6.67% a year ago.

Frank Nothaft, a chief economist has suggested that interest rates for fixed-rate mortgages may continue to decline steadily. He has, however, warned that ARM rates may rise after they rose slightly after the Federal Reserve's Open Market Committee hinted it might increase the overnight bank lending rate.

Despite the gloomy economic forecast, Nothaft believes that the housing market will improve, with signs that an upturn is already on the cards. The pace of home-price declines has apparently ground to a halt for the fourth straight month .There are also signs more buyers may be getting ready to return to the market.