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30-year mortgage rate hits record low

The average rate on a 30-year fixed mortgage has fallen to its lowest level on records dating to 1971.

The rate on the most popular mortgage dipped to 4.15 percent from 4.32 percent a week ago, Freddie Mac said Thursday. Its previous low of 4.17 percent was reached in November.

The last time long-term rates were lower was in the 1950s, when 30-year loans weren't widely available. Most long-term home loans lasted 20 or 25 years.

Few expect record-low rates to energize the depressed home market. Over the past year, the average rate on the 30-year fixed mortgage has been below 5 percent for all but two weeks. Yet prices and sales remain unhealthy and are holding back the overall economy.

Five years ago, the average 30-year fixed rate was near 6.5 percent. In 2000, it exceeded 8 percent.

Most homeowners are paying rates more than a full percentage point higher than the current average. The average rate on all outstanding mortgages is 5.3 percent, Freddie Mac said, citing data from the Bureau of Economic Analysis.

"The housing market is not going to turn around because of this, because it isn't the mortgage rate that matters," said Joel Naroff, head of Naroff Economic Advisors. Naroff blamed the "horrendous" process of qualifying for a mortgage despite tougher lending standards. He said trying to sell a home in many markets is just as difficult.

Banks are insisting on higher credit scores and larger down payments for first-time buyers. Many repeat buyers have too little equity invested in their homes to qualify for loans. Others are too nervous about the economy or their job security to invest in a home.

The average rate on a 15-year fixed mortgage, which is popular for refinancing, fell to 3.36 percent, also a record low. It's the third straight week of record lows for the popular refinancing option. Freddie Mac's records date to 1991, but analysts believe the new low on the 15-year mortgage is the lowest ever.

Borrowers who qualify have rushed to refinance and take advantage of the low rates. Refinancing accounted for 70 percent of mortgage applications in the first half of the year, Freddie Mac said. Refinancings provide less benefit to the economy than home purchases do.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

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