U.S. 30- and 15-year mortgage rates fell to fresh lows in the past week amid concerns about the economy, according to a survey released on Thursday by Freddie Mac, the second-largest U.S. mortgage finance company.

Rock bottom mortgage rates offer a glimmer of hope for a housing market that has been struggling to gain traction since the expiration of popular home buyer tax credits several months ago.

Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 4.56 percent for the week ended July 22, down from the previous week's 4.57 percent and its year-ago level of 5.20 percent, according to the survey.

Freddie Mac started the survey in April 1971.

Meanwhile, 15-year fixed-rate mortgages averaged 4.03 percent, down from 4.06 percent last week, the lowest since Freddie Mac began surveying this type of loan in 1991.

The decline in mortgages rates over the past few weeks echoes the recent signs of weakening confidence in the strength of the economy, particularly the housing and consumer sectors, Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

Mortgage rates are linked to yields on Treasuries and mortgage-backed securities.

Home sales have fallen by the wayside since the expiration of government tax credits. The National Association of Realtors on Thursday said sales of U.S. existing homes fell to a three-month low in June.

To take advantage of the tax credits, buyers had to sign purchase contracts by April 30. Contracts originally had to close by June 30, but that was extended another three months.

Despite record low mortgage rates, the housing market remains highly vulnerable, with a flood of foreclosures in the pipeline and high unemployment seen weighing heavily.

Several factors drive a home purchase decision, said Robert Grosser, president of Luxury Mortgage in Stamford, Connecticut. Job stability, available funds for a down payment, and qualifying under today's more stringent credit requirements are at the top of the list.


With interest rates dropping to their lowest since Freddie Mac started the survey, home loan refinancing activity should continue to show strength and demand for loans to purchase a home may gain traction.

The Mortgage Bankers Association said on Wednesday that mortgage applications jumped last week as demand for loans to purchase homes rose for the first time in five weeks.

Confidence is slowly returning which will cause the purchase market to accelerate further in time, said Alan Rosenbaum, president of Guardhill Financial, a New York-based mortgage banker and brokerage company.

Employment has stabilized in our area which is encouraging new purchase business, he said.

Freddie Mac said the rate on the 5/1 ARM, set at a fixed rate for five years and adjustable each following year, was 3.79 percent, down from 3.85 percent last week. One-year adjustable-rate mortgages (ARMs) were 3.70 percent, down from 3.74 percent last week.

A year ago, 15-year mortgages averaged 4.68 percent, the one-year ARM was 4.77 percent and the 5/1 ARM 4.74 percent.