Interest rates on long-term mortgage loans fell in the latest week, according to mortgage financier Freddie Mac Thursday, sinking back down toward record low territory as more reports filed in pointing to continued economic distress.

“Mortgage rates followed bond yields lower this week as recent economic reports suggest the economy is still slowing, which reduces the future threat of inflation,” said Frank Nothaft, Freddie Mac vice president and chief economist. “And consumer sentiment fell in February for the first time in three months to near its lowest level since May 1980, while industrial production slowed in January by more than the market consensus. In addition, the Federal Reserve lowered its growth forecasts for this year during its policy-setting meeting on January 27-28, noting a deeper contraction in the economy as the credit crunch tightens.

“Meanwhile, the housing market is not doing any better. New housing construction slowed to an all-time record low of 466,000 homes (annualized) in January since records began in January 1959. And although homebuilder confidence ticked up in February from a record low, builder expectations of sales over the next six months hit a record low since it was first published in January 1985.”

The average rate on a 30-year fixed rate mortgage dropped to 5.04 percent, excluding fees, in the week ended February 19, 2009, down from 5.16 percent the previous week. The current rate is only slightly higher than the all-time record low of 4.96 percent from the week of January 15, 2009. One year ago, the average rate was an entire point higher at 6.04 percent.

Rates on 15-year fixed rate loans also sank, falling to 4.68 percent from 4.81 percent the week before. Last year at this time, the average interest rate was 5.64 percent. One-year adjustable rate mortgages average 4.80 percent, a decrease from 4.94 percent one week earlier. A year ago, the average rate was 4.98 percent.