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A new low for 30-year fixed-rate mortgages

Homeowners can refinance at 5.14%. But that rate is not available to those with poor credit or little equity.

WASHINGTON - Rates on 30-year fixed-rate mortgages fell to a record low for the second straight week, causing refinancing applications to surge to the highest level in more than five years, a month after the Federal Reserve pledged to channel billions to prop up the sinking U.S. housing market.

While homeowners around the country are taking advantage of historically low rates to refinance their loans, the opportunity is not available to those with poor credit or little equity in their homes, and foreclosures are still likely to surge.

Freddie Mac, the mortgage company, reported yesterday that average rates on 30-year fixed-rate mortgages dropped to 5.14 percent this week, down from the previous record of 5.19 percent, set last week. The rate was the lowest since Freddie Mac's weekly mortgage rate survey began in April 1971 and the eighth straight week of declines.

Mortgage rates started falling after the Federal Reserve launched a sweeping effort in late November to aid the U.S. housing market by purchasing up to $600 billion of mortgage-related securities and other debt issued by Fannie Mae, Freddie Mac, and the Federal Home Loan Banks.

Last week, the Fed, aiming to free up lending and jolt the economy back to life, cut its key interest rate from 1 percent to a target range of zero to 0.25 percent and pledged to keep funneling money into the market for mortgage investments.

Meanwhile the Mortgage Bankers Association said yesterday that applications and refinance activity were at their highest levels since July 2003.

More than 80 percent of applications came from borrowers looking to refinance into loans with more affordable rates, the trade group said.

The average rate on a 15-year fixed-rate mortgage dropped to 4.91 percent from 4.92 percent last week, Freddie Mac said.

Rates on five-year adjustable-rate mortgages fell to 5.49 percent, compared with 5.6 percent last week. Rates on one-year adjustable-rate mortgages rose to 4.95 percent, from 4.94 percent last week.

Meanwhile, with 2008 home sales falling to the lowest point in at least 10 years, housing-industry lobbyists are pressing in Washington for further aid to the housing market. Home builders want tax credits of up to $22,000 for home purchases and subsidies that would bring mortgage rates to as low as 3 percent for the first half of next year.

"It's just a matter of some spark," David Crowe, chief economist at the National Association of Home Builders, said Tuesday. "The consumer is looking for some signal that now is the time."