Mortgage rates drop to 37-year low

By Julie Haviv

NEW YORK (Reuters) - Interest rates on U.S. 30-year fixed-rate mortgages dropped for a ninth consecutive week, reaching their lowest level in 37 years, according to a survey released on Wednesday by home funding company Freddie Mac.

Interest rates on the 30-year fixed-rate mortgage dropped to an average of 5.10 percent for the week ending Wednesday, down from the previous week's 5.14 percent, Freddie Mac said.

It was the lowest rate for the 30-year fixed-rate mortgage since Freddie Mac started the Primary Mortgage Market Survey in 1971.

"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," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

Mortgage rates have dropped dramatically since the Federal Reserve unveiled a plan last month to buy up to $500 billion of mortgage securities backed by government-sponsored enterprises Fannie Mae, Freddie Mac and Ginnie Mae. The program also entails buying up to $100 billion of debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

Mortgage rates appear destined to head even lower.

The Fed on Tuesday moved forward aggressively with an effort to drive down mortgage costs, setting a goal of buying $500 billion in mortgage-backed securities by mid-2009.

The battered housing market is critical to the U.S. economy, with its impact ranging from the construction industry to the sale of appliances and furniture. An improvement in the housing market could portend a turnaround for the world's largest economy, which has been in a recession since late 2007.