30-Year Rates Fall Below 5 Percent...

Mortgage rates dropped to their 11th straight weekly decline, reaching new record lows, according to Freddie Mac.

Interest rates on 30-year, fixed rate mortgages averaged 4.96 percent this week, down from a previous week's 5.01 percent.

The low rates have caused a spike in home refinancing loans and a welcome relief to cash-strapped home owners facing a slowing economy and rising unemployment rates.

"The fact that interest rates have dropped to a record low is an important development since more affordable home financing could help bring buyers back to the market and prevent some of these foreclosures," says Lawrence White, professor of economics at New York University's Stern School of Business.

Other rates were mixed for the week:

15 year fixed rates: averaged 4.65 percent, up from 4.62 percent.

1-year adjustable rate mortgages: fell slightly averaging 4.89 percent from 4.95 percent last week.

5/1 ARMs: averaged 5.25 percent compared with 5.49 percent last week.

Mortgage rates have continued to drop ever since the Federal Reserve announced a plan in December to buy up $500 billion of mortgage securities backed by Fannie Mae, Freddie Mac, and Ginnie Mae—the government-sponsored enterprises.

Freddie Mac started recording mortgages in 1971.

Source: Reuters, Julie Haviv (1/15/09)