Average interest rates on U.S. mortgage loans fell for the ninth consecutive week, according to mortgage giant Freddie Mac Wednesday, falling to a new all-time low, making mortgage loans more palatable to borrowers around the country.

The rate on a 30-year fixed rate loan dropped to 5.10 percent, excluding fees, during the week ended December 31, 2008, down from 5.14 percent. One year ago, the average rate was almost an entire point higher at 6.07 percent.

“Interest rates for 30-year fixed-rate mortgages fell for the ninth straight week and represented a third consecutive all time record low since Freddie Mac’s survey began in April 1971,” said Frank Nothaft, Freddie Mac vice president and chief economist. “… As a result, the number of refinance applications for conventional mortgages jumped over 500 percent between the weeks ending on October 31st and December 26th.”

“Lower rates and falling house prices are also making homeownership more affordable to potential homebuyers,” Nothaft added. “For instance, house prices fell 18 percent over the 12-month period ending in October, according to the S&P/Case-Shiller 20-city composite index. Every city posted a second consecutive month of decline in October. From its peak set in July 2006, the composite index is down 23.4 percent.”

Rates also dropped significantly on the 15-year fixed rate mortgage to an average of 4.83 percent from 4.91 percent the previous week, representing a four and a half year low. Last year at this time, the average rate was 5.68 percent.

Short-term loans also experienced interest rate drops as the one-year adjustable rate mortgage carried an average rate of 4.85 percent, down from 4.95 percent one week earlier. During the same week in 2007, the average rate was 5.47 percent.

Mortgage company Freddie Mac announced Wednesday that U.S. mortgage interest rates sunk to their lowest point on record during the latest week, as weak economic data indicated more troubled financial times ahead.

“Interest rates on 30-year fixed-rate mortgages eased for the eighth straight week and set another record low since Freddie Mac’s survey began in 1971,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Real GDP growth fell 0.5 percent in the third quarter of the year, pulled down by the largest drop in consumer spending since the second quarter of 1980. The market consensus calls for an even larger decline in the last three months of the year.

“The housing market, meanwhile, continues to contract. Existing home sales (excluding condominiums and co-ops) fell 8.6 percent in November to 4.0 million houses (annualized) in November, representing the slowest pace since July 1997. Moreover, the median sales price fell 12.8 percent from November 2007, the largest 12-month decline since records began in January 1968, according to the National Association of Realtors.”

The average commitment rate on a 30-year fixed rate loan fell to 5.14 percent, excluding fees, during the week ended December 24, 2008, down from 5.19 percent the previous week. One year earlier, the average rate was 6.17 percent.

Rates on 15-year fixed rate mortgages slipped to 4.91 percent, a four-and-a-half year low, down from 4.92 percent the week before.  Last year during the same time, the average commitment rate was 5.79 percent.

Rates on one-year Treasury-indexed adjustable rate mortgages also fell in the latest week to an average of 4.95 percent, down from 4.94 percent. One year ago, one-year ARMs carried an average rate of 5.53 percent. 

The U.S. Treasury Department has already committed $350 billion of the $700 billion rescue fund, including $13.4 billion for troubled automakers, according to Treasury Secretary Henry Paulson, and Congress will need to release the rest soon to keep emergency funds available to aid the markets.

“Today, we have acted to support General Motors and Chrysler, with the requirement that they move quickly to develop and adopt acceptable plans for long term viability. This step will prevent significant disruption to our economy, while putting the companies on a path to the significant restructuring necessary to achieve long-term viability,” Paulson said in a statement Friday. “…As a result of this decision, Treasury effectively has allocated the first $350 billion from the TARP (Troubled Asset Relief Program.) It is clear… that Congress will need to release the remainder of the TARP to support financial market stability.”

He did, however, say that he has “confidence that we have the necessary resources to address a significant financial market event,” based on the powers of the Federal Reserve, the FDIC, and the money that has been committed but not yet disbursed.

Paulson mentioned his intention to discuss plans for moving forward with the economic team of President-elect Barack Obama and with congressional leadership.

The Secretary may get a fight for the requested money from several members of Congress though. Congressman Barney Frank, D-Mass., Chairman of the House Financial Services Committee has vowed to block the use of more funds unless Treasury is committed to allotting a great deal of it toward helping foreclosure-bound homeowners.

“They’re not going to get the (money) unless they get very serious about the foreclosure modifications and showing us how we’re going to get some lending out of the banks,” Frank said earlier this month.

To date, in addition to the commitment of $13.4 billion this week for the auto industry, the Treasury has allocated $315 billion of the original $350 billion bailout funds for providing more resources for banks and American International Group as well as  $20 billion for use in consumer credit markets.

Rates on all U.S. mortgages dropped in the latest week, with the 30-year fixed rate mortgage posting an all-time record low, according to mortgage company Freddie Mac Thursday.

“Interest rates for 30-year fixed-rate mortgage rates fell for the seventh consecutive week, moving these rates to the lowest since the survey began in April 1971,” said Frank Nothaft, Freddie Mac vice president and chief economist.

The average rate on the 30-year fixed rate loan plummeted more than a ¼ of a point to 5.19 percent, excluding fees, during the week ended December 18, down from 5.47 percent the previous week. One year ago, the average rate was 6.14 percent.

Rates on 15-year fixed rate mortgages also fell to a record low of 4.92 percent from 5.20 percent the preceding week. The 15-year mortgage rate has not averaged so low since the week of April 1, 2004. Last year at this time, the average was 5.79 percent.

One-year Treasury-indexed adjustable rate mortgages (ARMs) carried an average rate of 4.94 percent, down from 5.09 percent the week before. One year earlier, the average commitment rate was 5.51 percent.

Freddie Mac attributed the dramatic decreases to a historic move Tuesday by the Federal Reserve. “The decline was supported by the Federal Reserve announcement on December 16th, when it cut the federal funds target to a record low and stated it stood ready to expand its purchases of mortgage-related assets as conditions warrant,” Nothaft said.

The Fed promised to “employ all available tools” to get the economy back on a path of sustainable growth, suggesting that in the meantime “weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time,” the Fed said in a statement. The result would likely mean consistently low mortgage interest rates as well.

The National Association of Home Builders reported that its index of home builder sentiment, a measure of confidence in the housing market, remained at a record low reading of 9 in December. That number reflects the lowest point on record since the group began its survey in 1985.

Any reading below 50 is an indication that more builders view housing market conditions as poor rather than favorable.

“The crisis continues,” said NAHB Chairman Sandy Dunn  in a statement. “While builders are doing everything we can in the way of price and non-price incentives to move new homes off the books, buyers are afraid to move forward, and in any case there is almost no way to compete with the cut-rate product that is continually flooding the market from mounting foreclosures.”

The NAHB hopes the government will give buyers more incentive to move forward by extending more tax credits and interest rate modifications in coming months.

“Expanding the first-time buyer tax credit and providing government action to reduce mortgage rates would go a long way toward arresting this downward spiral, just as a combination of similar moves worked in the 1970s to boost the housing market and economy,” NAHB Chief Economist David Crowe said.

Currently, U.S. home builders are at a stand still, constructing very few new homes, waiting for current inventories to get worked off. The NAHB sees no immediate hope for market improvement.

“We have seen no improvement over the past month in terms of sales conditions for new homes,” Crow lamented. “In fact, certain factors have gotten progressively worse, not the least of which is the job market, where massive layoffs are having a devastating effect on consumer confidence.”

Without government intervention, the NAHB does not predict a quick end to landslide of foreclosures and feeble new home sales.

Rates on 30-year fixed rate U.S. mortgage loans fell this week to their lowest point since March of 2004, a more than four and a half year low, according to data from mortgage company Freddie Mac Thursday.

“Following the release of the November employment report, which showed the largest monthly decline in jobs since December 1974, bond yields fell slightly this week allowing fixed-rate mortgage rates room to ease back a little further,” said Frank Nothaft, Freddie Mac vice president and chief economist.

The 30-year fixed rate mortgage carried an average rate of 5.47 percent, excluding points, during the week ended December 11, a drop from 5.53 percent the previous week. At the same time last year, the average rate was 6.11 percent.

Rates on 15-year fixed rate loans also fell, declining to 5.20 percent from 5.33 percent the previous week. One year ago, the average rate on these loans was 5.78 percent. The last time the 15-year mortgage rate was that low was at the beginning of the year, during the week of February 7, 2008, when the average was 5.15 percent.

One-year Treasury-indexed adjustable rate mortgages had an average interest rate of 5.09 percent, an increase from 5.02 percent one week earlier. During the same week of 2007, the average one-year ARM rate was much higher at 5.50 percent.

Things in the mortgage arena remain unstable, leaving the future of interest rates equally volatile, according to Freddie Mac.

“The housing market still hangs in the balance, however,” commented Nothaft. “On a year-over-year basis, after rising in both August and September, pending existing home sales fell 1.0 percent in October, based on figures from the National Association of Realtors®. Meanwhile, conventional mortgage applications for home purchases over the week ending December 5th were up 2.0 percent from four weeks prior, but were still 51 percent below the same period last year, according to the Mortgage Bankers Association.”

The rate of mortgage loan delinquency in the U.S. increased to 3.96 percent in third quarter of 2008,  the seventh consecutive quarterly rise  and a 12 percent increase from the second quarter of this year, according to a survey from credit research company TransUnion.

“As expected, the mortgage sector continued to experience increases in the delinquency rate due to worsening economic conditions in both the labor and financial markets,” said Keith Carson, a senior consultant in TransUnion’s financial services group in a release Monday.

According to the TransUnion survey, a mortgage is delinquent if a borrower is 60 days late or more on the payments. Delinquencies are a traditional predictor of mortgage foreclosures and with the current rate up 54 percent from the same quarter last year, more heartache in the housing market is likely to follow.

Florida led the nation in the highest rate of delinquency at 7.82 percent. Nevada was a close second with a rate of 7.71 percent. The state was with the lowest delinquency pace was North Dakota at 1.35 percent. South Dakota and Montana also had relatively few late mortgages with rates of 1.6 percent and 1.71 percent, respectively.

While West Virginia was the only state to experience a decline in its delinquency rate during the third quarter (the rate fell by 0.39 percent), the District of Colombia saw the greatest increase with a 42.7 percent jump from the previous quarter.

“Our forecasting models predict that the national 60-day mortgage delinquency rate among mortgage borrowers will continue to rise in the fourth quarter of 2008 and throughout 2009, with the 2008 delinquency rates ending at 4.66 percent and 2009 rates possibly reaching 7 percent or greater,” said Carson.

There is some hope on the horizon, however. “Depending on the severity of the capital markets crisis, the ultimate outcome of the decline in the U.S. auto industry and the timing of a recovery in retail sales,” he commented, “we see the possibility of a flattening of mortgage delinquencies as the economy begins to stabilize and some sectors of the country begin to improve in the second quarter of 2010.”  

Federal Reserve Chairman Ben Bernanke advocated for more government intervention in the national foreclosure crisis Thursday in remarks before a Fed housing conference. He called on government officials to take steps such as buying up bad mortgage debt and refinancing endangered loans into more affordable mortgages.

“Despite good-faith efforts by both the private and public sectors, the foreclosure rate remains too high, with adverse consequences for both those directly involved and for the broader economy,”  Bernanke said. “More needs to be done.”

He also added that the housing crisis has “become inextricably intertwined with broader financial and economic developments,” citing the more than 2.25 million foreclosures expected to take place by the end of this year and the millions of homeowners who currently owe more on their mortgages than their homes are worth.

“A slowing economy has in turn reduced the demand for houses, implying a further weakening in the mortgage and housing markets,” Bernanke said. He added that “weakness in the housing market has proved a serious drag on overall economic activity. Steps that stabilize the housing market will help stabilize the economy as well.”

The Chairman recalled that the Fed has taken its own drastic measures to aid the faltering economy. It has lowered it target interest rate to 1 percent from 5.25 percent in August 2007. Many analysts believe the rate may be slashed again by a 0.5 percent point at its next meeting Dec. 15-16.

“To the extent that more accommodative monetary policies make credit conditions easier and incomes higher than they otherwise would have been, they support the housing market,” he said.

Bernanke suggested specifically that the U.S. government increase its efforts on the Hope For Homeowners program, a refinancing effort for struggling borrowers. He also recommended that the central government “purchase delinquent or at-risk mortgages in bulk and then refinance them into the (Hope for Homeowners) or another FHA program.”

The number of mortgage applications specifically for government-insured home loans continued to grow in October, according to recent data from the Mortgage Bankers Association.

The government-insured share of all applications (including Federal Housing Administration or FHA loans) rose to 32.9 percent during October 2008, the highest percentage since February 1991. It was also up dramatically from a 10.3 percent share last year at the same time. The percentage has steadily risen since the beginning of this year when it was 9.4 percent.

“This increase in the share of government-insured mortgage applications provides further evidence that there are still loans available to qualified borrowers, particularly through the FHA,” said MBA Chairman David G. Kittle. “The mortgage market remains fully operational and lenders are working to ensure borrowers with sufficient down payment and good credit have the opportunity of homeownership.”

The MBA suggested several reasons for the rise in popularity of government-insured loans over the past year.

For example, FHA loans are among the least expensive mortgages when it comes to down payment requirements. Borrowers can make a down payment as little as three percent of the total loan amount.

Another reason is that the Economic Stimulus Act of 2008 in March and then the Housing Bill in July raised the conforming loan limits, making it possible for those in high-cost markets to take advantage of FHA programs.

Additionally, borrowers with less than perfect credit will often more readily qualify for FHA loans than they would with loans from companies like Freddie Mac and Fannie Mae. +

Finally, FHA loans offer upfront mortgage insurance premiums which are often more attractive to buyers than paying hundreds of dollars in private mortgage insurance until the loan-to-value ratio reaches 80 percent or more.

As the economy becomes increasingly unstable, more and more borrowers are finding safety and financing availability with FHA loans. That will likely remain the case until the market reaches equilibrium again and investors return to mortgage backed securities arena.