US 30-yr mortgage rates drop in latest wk-Zillow

NEW YORK, July 20 (Reuters) - Interest rates on 30-year fixed-rate mortgages dropped in the latest week, reaching a record low as investors piled into safe-haven U.S. government debt, real estate website Zillow.com said on Tuesday, .

Lower interest rates on mortgages should lift home loan refinancing activity, putting more cash into consumers' hands to funnel into the economy. They also make homes more affordable as the housing market copes with the absence of government support.

Mortgage rates for 30-year fixed mortgages, the most widely used loan, were 4.37 percent Tuesday afternoon, down from 4.49 percent at the same time last week.

The rate was the lowest recorded since Zillow Mortgage Marketplace launched in April 2008 and was one point lower than what the company reported on Monday. The 30-year fixed mortgage rate peaked at 4.47 percent last Wednesday and then hovered near 4.40 percent for the remainder of the week, Zillow said.

Fifteen-year fixed mortgage rates were at 3.89 percent, down from 3.98 percent the prior week. Rates for 5/1 adjustable-rate mortgages, or ARMs, set at a fixed rate for five years and adjustable each following year, were 3.37 percent, down from 3.47 percent.

While low rates and high affordability helped the housing market to gain ground over the past year, it has struggled since the April 30 expiration of popular homebuyer tax credits.

The Commerce Department on Tuesday said U.S. housing starts in June hit their lowest level in eight months.

To take advantage of the tax credits, buyers had to sign purchase contracts by April 30. Contracts originally had to close by June 30, but that was extended another three months.

Mortgage rates are linked to yields on Treasuries and yields on mortgage-backed securities. Yields move inversely to price.

Treasuries have seen strong demand in recent weeks as the fiscal crisis in troubled euro zone countries and weak economic data sent global investors into safe-haven U.S debt. (Editing by Dan Grebler)