Mortgage rates drop for 3rd week: Freddie Mac

By Julie Haviv

NEW YORK (Reuters) - U.S. mortgage rates dropped for a third consecutive week, reaching their lowest since late May, a move that bodes well for the hard-hit housing market.

Interest rates on U.S. 30-year fixed-rate mortgages dropped to 5.14 percent for the week ending July 16, down from the previous week's 5.20 percent, according to a survey released on Thursday by home funding company Freddie Mac.

That is the lowest since the week ended May 28, but significantly higher than the record low of 4.78 percent set the week ending April 2. Freddie Mac started the Primary Mortgage Market Survey in 1971.

The drop in rates is a positive for the U.S. housing market, which has been showing some signs of stabilization, with sales rising and home price declines moderating in many regions of the country.

Leif Thomsen, CEO of Mortgage Master, in Walpole, Massachusetts, said there is still a sense of nervousness in the market amid rising unemployment, which increases anxiety and decreases confidence in pulling the trigger on home purchases.

"However, on the positive side we have seen a dramatic shift in the business we're receiving in regards to the ratio of refinancing loans to new purchases," he said.

Previously, when rates were dropping each day, people rushed to take advantage, generating about 80 percent of Mortgage Masters' total business in home loan refinancing, he said.

Thomsen said there is a sense that timing is not going to get much better for buying a home, and people are becoming anxious.