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. 

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.

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.”

Federal Reserve Chairman Ben Bernanke has recently admitted he was wrong to assume that the effect of the subprime mortgage crisis would be limited.

“I and others were mistaken early on in saying that the subprime crisis would be contained,” Bernanke said in an article entitled “Anatomy of a Meltdown” in the December 1 issue of The New Yorker.

“The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict,” he said.

The subprime crisis hit began in the summer of 2007 as adjustable rate mortgages made to subprime or bad credit borrowers started to reset at higher interest rates. Many of those homeowners were unprepared for the dramatic jump in their monthly payments and were forced into foreclosure.

As those losses started to scare off investors in the secondary mortgage market, liquidity for home loan lenders began to dry up, leaving them with little money to lend to new borrowers. Banks immediately  tightened up their credit standards, refusing to take on risky loans as they had been doing during the housing boom.

The result has meant that first-time home buyers and poor credit borrowers have had a very difficult time obtaining funding for home purchases and refinances, slowing the formerly bustling mortgage market to a halting pace.

The fallout from this slowdown has impacted even good credit home buyers and owners, restricting their home loan options and decreasing their property values as neighboring homes fall into foreclosures and subsequent disarray.

Wall Street has also felt the effects as many banks and lenders have filed for bankruptcy with the loss of capital from investors.

The Fed has reacted to the crisis by cutting their key interest rate in an attempt to stimulate more lending. It has also recently made plenty of short-term cash loans to struggling lending institutions in order to keep the supply of money in the market flowing. The impact of these controversial actions has not yet been determined but many fear that the taxpayer will end up footing the bill for all the Fed’s bailout activity.

Interest rates on U.S. mortgage loans fell for the third straight week as economic data showed weaker prospects for the future, according to mortgage giant Freddie Mac Thursday.

“Long- and short-term mortgage rates fell for the third consecutive week amid continuing signs of a slowing economy,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Retail sales fell for the fourth straight month in October and consumer sentiment remained near a 28-year low in November.

“In fact, the Federal Reserve during its October 28-29 committee meeting lowered its economic growth forecasts for 2008 and 2009, according to its minutes released this week.”

In response to such disheartening news, home loan lenders lowered their rates on 30-year fixed rate mortgages to an average of 6.04 percent, during the week ended Nov. 20, excluding points, down from 6.14 the previous week and 6.20 percent one year ago.

The average interest rate on 15-year fixed rate loans dropped to 5.73 percent from 5.81 percent the week before. At this time last year the average rate was 5.83 percent.

Rates on one-year adjustable rate mortgages averaged 5.29 percent, a decrease from 5.33 percent a week earlier and from 5.42 percent the previous year.

Freddie Mac complies its survey of weekly interest rates from roughly half of all lenders in the country. It is a “stockholder-owned corporation established by Congress in 1970 to provide liquidity, stability and affordability to the nation’s residential mortgage markets,” although recent financial crises have forced the federal government to place the company into a conservatorship. This government control period is designed to get the company operating on a financially-sound basis again and to make sure that mortgage money remains available for qualified borrowers.

A volatile economy continued to affect the U.S. mortgage market this week, causing mortgage demand and interest rates to plummet.

According to the Mortgage Bankers Association’s index, home loan application volume decreased by 20.3 percent to a a seasonally adjusted index reading of 379.9 during the week ended Oct. 31.

Both refinance and home purchase loan requests were lower in the latest week, with the MBA’s refinance index falling 27.8 percent o 1075.4 and the purchase index sinking 13.9 percent to 260.9.

Refinances made up only 42.9 percent of all mortgage requests, compared with 46.9 percent the previous week.

During the roughly the same time, interest rates on long and short term home loans fell as well, according to Freddie Mac Thursday.

“Mortgage rates fell this week amid new indications of a pullback in consumer spending and a weaker jobs market,” said Freddie Mac vice president and chief economist Frank Nothaft.

The average rate on a 30-year fixed rate mortgage decreased to 6.20 percent, excluding fees, from 6.46 percent the week before. One year ago, the average rate was 6.24 percent.

Rates on 15-year fixed rate loans dropped to 5.88 percent from 6.19 percent. At this time last year, 15-year mortgages averaged a rate of 5.90.

One-year adjustable rate mortgages carried an average rate of 5.25 percent, down from 5.38 percent one week earlier. Last year, the average rate was 5.50 percent.

According to Nothaft, tighter lending standards are having the biggest impact on demand and rates.

“With the economy contracting and experiencing record home foreclosures, lenders tightened their credit standards further, according to the October Federal Reserve Senior Loan Officer survey,” he said. “Approximately 70 percent of banks raised their lending standards for prime mortgages and about 90 percent of banks that offer nontraditional mortgages did so as well.”

Long-term mortgages rates climbed higher during the latest week as U.S. Treasury bond yields increased, according to mortgage giant Freddie Mac Thursday.

In its weekly mortgage market survey, Freddie Mac found that the average interest rate on a 30-year mortgage loan jumped to 6.46 percent, excluding fees, during the week ended Oct. 30, 2008, up from 6.04 percent the previous week. One year ago, the average rate was 6.26 percent.

“Long-term mortgage rates followed long-term Treasury bond yields higher this week, pushing fixed-rate mortgages up to levels of two weeks ago,” said Frank Nothaft, Freddie Mac vice president and chief economist. Analysts have noted that many safety-minded investors have flocked to the dependable returns of Treasury bonds lately, scared away from volatile Wall Street investments.

Nothaft also commented on other types of loan interest rates. “The Federal Reserve’s 0.50 percentage point cut in the discount rate and federal funds target rate on Wednesday was widely anticipated in the financial markets and is likely to keep short-term interest rates low; consequently, initial interest rates on ARMs, which tend to be set relative to other short-term rates, may remain near current levels.”

Rates on 15-year fixed rate home loans averaged 6.19 percent, an increase from 5.72 percent the week before. Last year at this time, the average rate was 5.91 percent.

Interest rates on one-year adjustable rate mortgages also jumped, moving up to 5.38 percent from 5.23 percent last week. During the same week in October 2007, one-year ARMS averaged 5.57 percent.

Nothaft additionally mentioned other positive market factors that have influenced the direction of rates recently. “In other news,” he said, “house-price declines in many markets have improved housing affordability and stimulated home sales. In September, sales of existing homes rose 5.5 percent while sales of new homes were up 2.7 percent, at a seasonally-adjusted annual rate.”

After being taken over by the U.S. government in September, mortgage lending giants Fannie Mae and Freddie Mac are being retooled to get the troubled housing market back on track, instead of focusing on creating larger profits for the company shareholders and executives.

This means drastic cuts and changes in the personnel and policies, initiated at the direction of two new CEOs, hired seven weeks ago when the government took control of the failing mortgage lenders.

“Anything that is not necessary under the old traditions, we are going to discard,” said Fannie Mae Chief Executive Herb Allison Monday.

“Instead of focusing on maximizing returns, we (will) focus on what is the minimum return on capital that is necessary,” added Allison.

And Freddie Mac’s new CEO echoed the same sentiments.”Providing more liquidity to the market has been our primary focus,” said David Moffett, at a conference for the Mortgage Bankers Association.

Some of the changes that have already been made include a decision by both companies to halt future processing fee hikes that would bring in more profit, but make it more expensive and challenging for home buyers to get a mortgage loan.

Freddie Mac also announced last week that it will no longer accept no-doc loans, mortgages requiring no proof of income. These “liar loans” allowed many to jump into the housing market without truly having the ability to make the monthly payments. The result has been an intense rate of default, leading to a housing market overstocked with foreclosed homes.

Both Allison and Moffett have aimed much of their energy at helping borrowers refinance out of their costly adjustable rate mortgages into more affordable terms, hopefully saving them from foreclosure. And while Fannie Mae alone has saved 300,000 borrowers this year from losing their homes, according to Fannie’s Allison, “that is not good enough. We need to ramp up our activities.”