June 10, 2010 / 2:51 PM / 9 years ago

UPDATE 1-US mortgage rates at, near record lows-Freddie Mac

(Adds quotes, background, details from survey)

By Julie Haviv

NEW YORK, June 10 (Reuters) - U.S. mortgage rates dropped in the past week, with fixed-rate loans either reaching or nearing record lows, according to a survey released on Thursday by Freddie Mac FRE.P FRE.N, the second-largest U.S. mortgage finance company.

Enticing mortgage rates could be the saving grace for the hard-hit U.S. housing market as it adjusts to the withdrawal of government support.

Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 4.72 percent for the week ended June 10, down from the previous week’s 4.79 percent.

That is lowest the rate since the week ended Dec. 3, 2009, when it hit a record low of 4.71 percent. Freddie Mac started the survey in 1971. The rate is also sharply below its year-ago level of 5.59 percent.

Low mortgage rates caused home loan refinancing activity to surge throughout the month of May, putting more cash into consumers’ hands to funnel into the U.S. economy.

However, ever since the April 30 expiration of popular home buyer tax credits, rates have failed to spur demand for loans to purchase a home, which likely portends weak home sales.

Freddie Mac said the 15-year fixed-rate mortgage averaged 4.17 percent, down from 4.20 percent last week and the lowest since Freddie Mac started tracking the mortgage type in 1991.

“Following a relatively weak employment report, bond yields fell this week and mortgage rates followed,” 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.

Diane Saatchi, senior vice president at Saunders & Associates in Bridgehampton, New York, said demand is down.

“It could be due to the tax credit expiration or general uncertainty about the economy or both may be responsible,” she said. “For the most part, the daily financial news has been grim and there is worry about a double dip in the economy, so buyers are waiting and inventory is growing.”

To take advantage of the $8,000 first-time buyer credit or a $6,500 credit for existing owners buying a new residence, people had to sign purchase contracts by April 30 and must close by June 30.

The Mortgage Bankers Association said on Wednesday that applications to refinance home loans fell last week, while purchase demand fell for a fifth week to reach a fresh 13-year low. For details double-click on [ID:nNLL8HE661].

One-year adjustable-rate mortgages (ARMs) were 3.91 percent, down from 3.95 percent last week and the lowest since the week ended May 27, 2004. The rate on the 5/1 ARM, set at a fixed rate for five years and adjustable each following year, was 3.92 percent, slightly lower than the 3.94 percent last week. [ID:nWALAHE68O]

A year ago, 15-year mortgages averaged 5.06 percent, the one-year ARM was 5.04 percent and the 5/1 ARM 5.17 percent. (Editing by Chizu Nomiyama)

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