Mortgage rates for 30-year U.S.
loans declined, matching the lowest level on record, as the
European debt crisis drove investors to the relative safety of
Treasury bonds.

The average rate for a 30-year fixed loan fell to 3.94
percent in the week ended today from 3.99 percent, Freddie Mac (FMCC)
said in a statement. That rate, first reached in October, is the
lowest in records dating to 1971. The average 15-year rate fell
to an all-time low of 3.21 percent from 3.27 percent, according
to the McLean, Virginia-based mortgage-finance company.

The housing market has been weighed down by an 8.6 percent
unemployment rate, tighter lending and foreclosures even as
borrowing costs fall. Yields on 10-year Treasuries, a benchmark
for consumer loans including mortgages, dropped this week amid
concern that Europe’s fiscal crisis will hobble U.S. expansion.

“To the extent Europe’s credit crisis is lowering Treasury
yields and mortgage rates, that would support the U.S. housing
market,” Sal Guatieri, a senior economist at BMO Capital
Markets in Toronto, said in an interview yesterday.
“Unfortunately there are negative ramifications from Europe’s
crisis, in particular the drop in equity values and the impact
on consumer confidence.”

Lower borrowing costs have helped boost refinancing as
homeowners seek to reduce their monthly payments. U.S. home-loan
applications climbed 4.1 percent in the week ended Dec. 9,
according to a Mortgage Bankers Association index. The
Washington group’s gauge of refinancing climbed 9.3 percent,
while its index of purchases fell 8.2 percent.

To contact the reporter on this story:
Prashant Gopal in New York at
pgopal2@bloomberg.net

To contact the editor responsible for this story:
Kara Wetzel at
kwetzel@bloomberg.net