August 26, 2010 / 2:40 PM / 9 years ago

US mortgage rates decline to lowest on record-Freddie

NEW YORK, Aug 26 (Reuters) - U.S. mortgage rates fell in the latest week to the lowest on record and posted their ninth drop in the last ten weeks, Freddie Mac said on Thursday.

The average rate on U.S. 30-year fixed-rate mortgages, the most widely used home loan, averaged 4.36 percent in the week ended Aug. 26, down from 4.42 percent in the previous week and 5.14 percent from a year earlier, according to the survey by Freddie Mac, the second-largest provider of funding for residential loans. It began began the survey in 1971.

The rate followed recent declines in U.S. Treasury yields after a wave of reports suggested the economic recovery was faltering.

Housing data this week showed home resales fell in July beneath already bearish expectations to their slowest pace in 15 years, while new home sales slumped last month to the worst level since the U.S. Commerce Department began collecting the data in 1963.

Home refinancings have picked up as mortgage rates fell, but have not kept the same pace as when costs declined in previous years. Tight credit standards and loss of homeowner equity during the housing slump have limited access.

Bottlenecks and capacity constraints have also kept big lenders from lowering rates in line with other interest rates, analysts at Amherst Securities Group said in a research note.

Fifteen-year fixed-rate mortgages averaged 3.86 percent, down from 3.90 percent last week.

Fifteen-year mortgages have been become a popular refinancing option for borrowers that find they can shorten the terms of their loans with little increase in mortgage payment. (Editing by Jeffrey Benkoe)

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