Rates on 30-year loans fall below 5 percent

updated 2:37 p.m. ET Nov. 5, 2009

Rates for 30-year home loans dipped below 5 percent this week after rising for three straight weeks.

The average rate fell to 4.98 percent from 5.03 percent a week earlier, mortgage company Freddie Mac said Thursday.

Rates had hovered below 5 percent for nearly a month until inching upward two weeks ago. They hit a record low of 4.78 percent in the spring, but are still attractive for people looking to buy a home or refinance.

The Federal Reserve has pumped $1.25 trillion into mortgage-backed securities in an effort to lower rates on mortgages and loosen credit. Rates on 30-year mortgages traditionally track yields on long-term government debt.

That, plus a federal tax credit of up to $8,000 for first-time homebuyers, has helped boost the ailing housing market.

The number of signed contracts to buy previously occupied homes rose for the eighth month in a row in September, while residential construction spending jumped by 3.9 percent, the largest gain in more than six years, data this week showed.

And the House is set to vote on a bill Thursday that extends and expands the tax credit to include buyers who already own homes. The bill passed the Senate on Wednesday.

In the expanded bill, buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time homebuyers — or anyone who hasn't owned a home in the last three years — would still get up to $8,000. To qualify, buyers have to sign a purchase agreement by April 30, 2010 and close by June 30.

Still, lenders are cautious and standards remain tight, so the best rates are available only to borrowers with solid credit and a 20 percent down payment.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day, frequently in line with long-term Treasury bonds.

The average rate on a 15-year fixed-rate mortgage declined to 4.40 percent from 4.46 percent recorded last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages averaged 4.35 percent, down from last week's 4.42 percent. Rates on one-year, adjustable-rate mortgages decreased to 4.47 percent from 4.57 percent.

The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac's survey averaged 0.7 points for 30-year loans. The fee averaged 0.6 points for 15-year, five-year and one-year loans.

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