UPDATE 4-US mortgage rates drop to new low, foreclosures up

(Adds data from Mortgage Bankers Association)

By Julie Haviv

NEW YORK, Jan 15 (Reuters) - U.S. mortgage rates dropped to another record low this week, giving a glimmer of hope for the hard-hit housing market even as data showed one in every 54 households received at least one foreclosure filing notice last year.

Interest rates on the 30-year fixed-rate mortgage averaged 4.96 percent for the week ending Jan. 15, down from the previous week's 5.01 percent, its 11th straight weekly decline, according to Freddie Mac.

Low mortgage rates have spurred a surge in home refinancing loans, and refinancing to lower monthly payments should provide a bit of relief to strapped consumers amid rising unemployment and a shrinking economy.

But the precipitous drop in mortgage rates has made only a marginal impact on demand for loans to purchase a home, offering little sign of a recovery from the worst housing downturn since the Great Depression.

"These things take time, so we cannot expect a pick up in demand for home purchasing to happen overnight," said Lawrence J. White, professor of economics at New York University's Stern School of Business.

"The fact that interest rates have dropped to a record low is an important development since more affordable home financing could help bring buyers back to the market and prevent some of these foreclosures," he said.

U.S. foreclosure activity jumped 81 percent in 2008, suggesting various state laws and private programs to slow the process have been ineffective, RealtyTrac reported on Thursday. For details, double-click on [ID:nN14473484]

Nearly 3.2 million foreclosure filings on 2.3 million properties were made last year, the Irvine, California-based research firm said. Filings include notice of default, auction sale or bank repossession.

"For those looking to buy a home, the serious question for them is when home prices will stop falling," White said.

"At some point, home prices will either stop falling or have fallen enough to bring buyers to the market and mortgage rates at these levels will certainly help," he said.

Mortgage rates have dropped dramatically ever since the Federal Reserve unveiled a plan in late November to buy up to $500 billion of mortgage securities backed by government-sponsored enterprises, Fannie Mae (FNM.P) (FNM.N), Freddie Mac (FRE.P) (FRE.N), and Ginnie Mae. The program also entails buying up to $100 billion of debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

The 30-year fixed-rate mortgage has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971.

At a minimum, the latest surge in mortgage refinancing should improve household cash flow by enough to moderate the deterioration of consumer spending, according to John Lonski, chief economist at Moody's.

"The surge in refis will not immediately stabilize consumer spending, but it does improve the outlook for retail sales 6 to 12 months hence," he said in commentary published Thursday.

The Mortgage Bankers Association, in its latest weekly survey, said its index of mortgage applications, which includes both purchase and refinance loans, was 46.2 percent above its year-ago level.

The MBA's purchase index was 35.9 percent below its level a year ago, while the group's refinancing applications index was 107.4 percent above its level a year ago.

OTHER INTEREST RATES MIXED

The 15-year fixed-rate mortgage averaged 4.65 percent, up from 4.62 percent. One-year adjustable-rate mortgages, or ARMs, fell slightly in the week to an average of 4.89 percent from 4.95 percent last week.

Freddie Mac said the "5/1" ARM, set at a fixed rate for five years and adjustable each following year, averaged 5.25 percent, compared with 5.49 percent a week earlier.

A year ago, 30-year mortgage rates averaged 5.69 percent, 15-year mortgages were at 5.21 percent and the one-year ARM was at 5.26 percent. The 5/1 ARM averaged 5.40 percent. The 5-year ARM has not been lower since the week ending September 8, 2005, when it averaged 5.24 percent.

Lenders charged an average of 0.7 percent in fees and points on 30-year mortgages, up from 0.6 percent the previous week, while they charged an average 0.7 percent in fees and points on 15-year mortgages, unchanged from the previous week.

The 5/1 ARM fees and points were 0.6 percent, down from 0.7 percent the previous week. The one-year ARM fees and points were 0.5 percent, unchanged from the previous week.

Freddie Mac and its larger sibling, Fannie Mae, were placed under government conservatorship in early September.

Freddie Mac is a mortgage finance company chartered by Congress that buys mortgages from lenders and packages them into securities to sell to investors or to hold in its own portfolio. (Additional Reporting by Lynn Adler; Editing by Kenneth Barry)