NEW YORK - Interest rates on U.S. 30-year fixed-rate mortgages fell below 5 percent on Friday, a significant psychological level that should help the hard-hit U.S. housing market to recover, according to real estate website

The 30-year fixed-rate mortgage, the most widely used home loan, fell to 4.94 percent on Friday after hovering between 5 percent and 5.10 percent on Thursday and around 5.05 percent a week earlier, according to Zillow Mortgage Marketplace.

May was the last time mortgage rates were consistently below 5 percent, Zillow said.

Many observers didn't expect rates to fall below five percent again after their brief flirtation in the sub-five percent range earlier this summer, said Stan Humphries, chief economist at in Seattle, Washington.

This should definitely create another uptick in refinance activity, he said.

The lower rates reflect a fall in yields on U.S. government bonds, which are linked to the mortgage market.

Mortgage rates have gyrated over the past few months after spending a good part of the year moving downward.

Attractive rates are a positive for the U.S. housing market, which has been showing some signs of stabilization, with sales rising and home price declines moderating in many regions of the country.

It could also be a nice boost to the home purchase mortgage market, arriving just at the time that the most active part of the 2009 home shopping season begins to wind down, Humphries said.

For buyers with secure jobs, good down payments and seeking to live in their new house for more than five years, it could be an attractive market right now with home prices having been reset several years and financing costs at historic lows, he said.

(Editing by Chizu Nomiyama)