UPDATE 1-US mortgage rates dip in latest week-Freddie Mac

(Adds quotes, background, details from survey)

By Julie Haviv

NEW YORK, April 29 (Reuters) - U.S. mortgage rates dipped in the latest week, a closely watched mortgage survey showed on Thursday, with rates remaining at historically low levels that should bode well for the hard-hit housing market.

Lower interest rates on mortgages may buoy home loan refinancing activity, putting more cash into consumers' hands to funnel into the U.S. economy. It also makes homes more affordable during the most important period, the spring selling season.

Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 5.06 percent for the week ended April 29, down from the previous week's 5.07 percent, according to a survey released by Freddie Mac FRE.P FRE.N, the second-largest U.S. mortgage finance company.

That is above the year-ago level of 4.80 percent as well as the record low of 4.71 percent in early December. Freddie Mac started the survey in 1971.

"Mortgage rates on 30-year fixed loans have averaged about 5 percent over the first four months of this year, staying within a band of roughly a quarter percentage point and virtually matching 2009's annual average," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

"These low rates have been helping to moderate house price declines over the course of the year," he said.

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

Rates are widely expected to rise this year as the economy improves and after the Federal Reserve ended its program of purchases of mortgage-related securities last month.

The federal government's $8,000 first-time home buyer tax credit and a $6,500 credit for home owners buying a new residence will soon expire. Eligible borrowers must sign contracts by April 30 and close loans by June 30.

Jim Gillespie, president and CEO of Coldwell Banker in Parsippany, New Jersey, said this has helped boost demand.

"The federal tax credits certainly helped the economy and the housing market overall," he said.

LOW RATES, MIXED DEMAND

The Mortgage Bankers Association said on Wednesday U.S. mortgage applications fell last week as a drop in home refinancing volume outweighed the highest demand for home purchase loans in six months, data from an industry group showed on Wednesday. For details double-click on [ID:nN28174948].

Freddie Mac said the 15-year fixed-rate mortgage averaged 4.39 percent in the latest week, unchanged from the the prior week. For rates table double-click on [ID:nWALTFE63L]

Interest rates on other types of loans were mixed.

One-year adjustable-rate mortgages (ARMs) were 4.25 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 4.00 percent, compared with 4.03 percent a week earlier.

A year ago, 15-year mortgages averaged 4.48 percent, the one-year ARM 4.82 percent and the 5/1 ARM 4.85 percent. (Editing by Padraic Cassidy)