Mortgage rates for a 30 year fixed loan increased from 5.12 percent to 5.14 percent.

"Rates are fairly stable and low right now," said Celia Chen, senior director at Moody's Economy.com in West Chester, Pennsylvania. "Conditions are looking more positive than they have for a long time."

Rising mortgage rates may slow down home sales. In July new homes sales increased as well as existing home sales.

Last year the Federal Reserve bought bonds backed by home loans to lower mortgage rates. The bonds that were purchased from Fannie Mae, Freddie Mac and Finnie Mae brought down yields on mortgage backed securities and allowed lenders to reduce rates on new loans.

In April mortgage rates reached a record low of 4.78 percent.

In May rates began to increase along with Treasury yields. In the week that ended June 11 a 30-year mortgage had a rate of 5.59 percent but has continued to decrease since then.

In July new home sales increased 9.6 percent to a 433,000 annual pace. Existing home sales increased 7.2 percent in July.

Mortgage applications began to increase 7.5 percent to 566.4 in the week that ended August 21.