Mortgage rates continued their downward trend this week, almost surpassing a record low set in December last year. A survey conducted by the Federal Home Loan Mortgage Corporation (Freddie Mac) showed that the average interest rate on 30-year fixed-rate mortgages sank to 4.78% for the week ending on May 27.

Interest rates on 30-year fixed-rate mortgages, the most widely used loan, fell from 4.84% last week. The average rate was said to be the lowest since interest rates hit 4.71% in the first week of December 2009.

While the latest development seems unfavorable to mortgage lenders, Freddie Mac vice-president and chief economist Frank Nothaft believes that low mortgage rates are actually good for the housing market. He stressed that they can stimulate home loan refinancing activity, adding that lower rates can make residential properties more affordable for home buyers. “These low rates will help to elevate home buyer affordability and soften the effects of the sunset of the home buyer tax credit,” Nothaft said.

Michael Moskowitz, president of New York-based lender Equity Now, expressed a similar sentiment. He pointed out that while the demand for home purchase loans has slowed down due to the expiration of the first-time home buyer’s tax credit program, more and more consumers are seeking home refinancing loans. “The drop in mortgage rates could not have come at a better time for the housing market. Better affordability, in my opinion, should have a stronger impact on housing demand than the tax credits.”

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