UPDATE 1-US mortgage rates set record lows as sales slump

(Adds Freddie Mac interview, pending sales, applications, byline)

NEW YORK, July 1 (Reuters) - U.S. mortgage rates slid to fresh record lows in the latest week amid tepid economic growth and tame inflation, home funding company Freddie Mac FRE.N said on Thursday.

Low borrowing costs and home prices that remain about 30 percent lower, on average, than peaks set four years ago, are tonic for an otherwise struggling U.S. housing market.

Home sales have fallen precipitously since the April 30 finish for buyer tax credits of up to $8,000. Buyers sped up purchases to meet the deadline, robbing from summer sales, and assuring a market that bounces along the bottom through the year.

Pending home sales contracts plummeted by a surprisingly large 30 percent in May, the National Association of Realtors reported on Thursday. [ID:nN01205635]

Fixed 30-year mortgage rates fell to 4.58 percent in the week ended July 1, the lowest since Freddie Mac record keeping began in 1971. The prior low was 4.69 percent the prior week, well below 5.32 percent a year ago.

Freddie Mac has revised its forecast for 30-year mortgage rates down to a range of 4-3/4 to 5 percent for the second half of the year, having predicted in January that rates could hit 6 percent by year-end.

“Interest rates on fixed-rate mortgages and the 5-year hybrid ARM fell once again to all-time record lows this week in a period where the economy struggles to gain momentum and inflation remains very low,” said Frank Nothaft, Freddie Mac chief economist.

With affordability high, the low in home sales after the tax credit should not be as low as it was in December and January, he said.

Low inflation, concerns about euro zone markets and the U.S. economy have driven investors into the safety of Treasury securities. That has sent down yields on bonds used to peg home loan rates.

“Certainly the risk of a double-dip is a little bit greater now than it was a couple of months ago, but our expectation is that we’ll see a continuation of a modest economic recovery,” Nothaft said in an interview.

All loan rates except the 1-year Treasury-indexed adjustable-rate mortgage that Freddie Mac tracks set new lows in the latest week. The average 1-year ARM rose just 0.03 of a percentage point to 3.80 percent, still down sharply from 4.94 percent a year ago.

The average 15-year home loan rate dropped to 4.04 percent from 4.13 percent a week ago and 4.77 percent a year ago.

See more Freddie Mac rates at [ID:nWAL1IE6BQ].

Sliding mortgage rates have stirred demand for homeowners to shave payments by refinancing.

Applications for refis jumped 12.6 percent last week to the highest level since May 2009, and represented nearly 77 percent of all loan requests, the Mortgage Bankers Association said on Wednesday. [ID:nNLLTHE67B]

Still, the industry group’s applications index was just about half the level seen in the spring of 2009 and purchase demand hovered near a 13-year low.

Many borrowers who could refinance already have done so when rates approached current levels.

“They don’t have sufficient financial incentive at this juncture to refinance again at this time,” said Nothaft.

Others may not meet lender requirements.

As for home purchases, unemployment near 10 percent and record foreclosures remain heavy headwinds to a robust housing rebound.

Editing by Andrew Hay