NEW YORK - U.S. mortgage rates held at their lowest level since late May in the latest week, low enough to continue to spur home loan demand and help the hard-hit U.S. housing market recover.

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, and even rising, in many regions of the country.

Interest rates on U.S. 30-year fixed-rate mortgages averaged 5.04 percent for the week ending September 24, unchanged from the previous week, according to a survey released on Thursday by home funding company Freddie Mac.

That is the lowest rate since 4.91 percent in the week ending May 28. Mortgage rates have hovered around 5 percent, widely viewed as a key psychologically level, for several weeks, but have stayed above 5 percent for 17 weeks.

The mortgage rate, however, is still significantly higher than the record low of 4.78 percent set the week ending April 2. Freddie Mac started the survey in 1971.

Michael Moskowitz, president of Equity Now, a direct lender based in New York City and licensed in 13 states, said when interest rates on mortgages jumped in June, refinancing activity at his company slowed down by at least half.

Thank goodness rates came back down now, he said. Ninety-five percent of our business is refinancing home loans.

Demand at these interest rate levels is very strong, he said.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, increased 12.8 percent in the latest week, the highest since the week ended May 22.

Other data on Thursday, though, confirmed the housing market was still weak.

The National Association of Realtors said sales of previously owned U.S. homes unexpectedly fell in August.

Thirty-year mortgage rates have been falling for most of this year after the Federal Reserve unveiled its plan to buy mortgage-backed debt in late November. The Fed from time to time met resistance in the bond market.

The U.S. government has acted to try to bring mortgage rates down to levels that would spur demand and help the battered housing market to begin to recover.

The central bank is aiming to keep interest rates on mortgages low for home buyers through early next year, extending its mortgage-backed securities purchase program to March 31, 2010, while keeping the size constant at $1.25 trillion.

Mortgage rates are linked to both Treasury and MBS yields.


Freddie Mac said the 15-year fixed-rate mortgage averaged 4.46 percent in the latest week, down from 4.47 percent the prior week, and the lowest since Freddie Mac started tracking it in 1991.

One-year adjustable-rate mortgages, or ARMs, were 4.52 percent, down from 4.58 percent last week. Freddie Mac said the 5/1 ARM, set at a fixed rate for five years and adjustable each following year, was unchanged at an average 4.51 percent.

A year ago, 30-year mortgage rates averaged 6.09 percent, 15-year mortgages 5.77 percent and the one-year ARM 5.16 percent. A year ago, the 5/1 ARM averaged 6.02 percent.

Freddie Mac and its larger sibling, Fannie Mae, were placed under government conservatorship in early September, 2008.

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 Lucia Mutikani, Mark Felsenthal and Alister Bull in Washington, Editing by Chizu Nomiyama)