Mortgage rates dip below 5 percent again: Freddie Mac

NEW YORK (Reuters) - U.S. mortgage rates dipped below 5 percent again, a key level that may boost home loan demand, according to a closely watched mortgage survey on Thursday.

The lowest mortgage rates in decades and high affordability helped the hard-hit housing market find some footing last year after a three-year slump. Attractive rates bode well for the housing market, which remains highly vulnerable to setbacks and heavily reliant on government intervention.

Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 4.97 percent for the week ended February 11, down from the previous week's 5.01 percent, according to a survey released by Freddie Mac FRE.P FRE.N, the second-largest U.S. mortgage finance company.

That is below the year-ago level of 5.16 percent, but above the record low of 4.71 percent in early December. Freddie Mac started the survey in 1971.

"Interest rates on 30-year fixed-rate mortgages are below 5 percent for a third week this year, which helps a number of homeowners to refinance their existing housing debt," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

Mortgage rates are linked to yields on Treasuries and yields on mortgage-backed securities.

Mortgage rates are expected to rise when the Federal Reserve stops buying mortgage-related securities at the end of March. The Fed's agency MBS and agency debt purchase programs, aimed at lowering borrowing costs, will have reached more than $1.4 trillion.

David Adamo, CEO of Luxury Mortgage, in Stamford, Connecticut, said 30-year fixed-rate mortgages should range between 5 percent and 5.50 percent this year.

"Although the Federal Reserve has reaffirmed the plan to discontinue the agency MBS purchase program in March, they have given assurances that they will step in on an 'as needed' basis to provide support to the markets," he said.

LOW RATES, LIMITED APPEAL

The appeal of attractive rates on home loan demand may be losing steam.

The Mortgage Bankers Association said on Wednesday U.S. mortgage applications dipped last week, reflecting reduced demand for home purchase loans.

Freddie Mac said the 15-year fixed-rate mortgage averaged 4.34 percent in the latest week, down from 4.40 percent the prior week.

Interest rates on other types of mortgages were mixed.

One-year adjustable-rate mortgages (ARMs) were 4.33 percent in the latest week, up from 4.22 percent the prior week. The rate on the 5/1 ARM, set at a fixed rate for five years and adjustable each following year, was 4.19 percent, compared with 4.27 percent a week earlier.

A year ago, 15-year mortgages averaged 4.81 percent, the one-year ARM 4.94 percent and the 5/1 ARM 5.23 percent.

(Editing by Padraic Cassidy)