WASHINGTON (AP) – Rates on 30-year mortgages dropped to a new low this week, the seventh time that has happened this year.

The average interest rate on a fixed-rate 30-year mortgage fell to a record low of 5.34 percent, the second week in a row that rates on this benchmark mortgage dropped to an all-time weekly low, Freddie Mac, the mortgage company reported Thursday in its weekly nationwide survey.

This week’s rate surpassed the previous low rate of 5.45 percent set last week. The new rate marks the lowest since Freddie Mac began tracking 30-year mortgages in 1971. Records that reach back earlier indicate that the rate is the lowest in more than four decades, economists said.

Low mortgage rates propelled home sales to record levels last year. And, this year is shaping up to be the second-best year on record for sales of existing homes and new ones, economists say. The housing market is one of the few bright spots of the lackluster economy.

“Interest rates remain low and funds seem to be readily available to creditworthy borrowers,” Federal Reserve Chairman Alan Greenspan told lawmakers on Capitol Hill Wednesday. “These factors, along with the ability of households to tap equity accrued in residential properties, should continue to bolster consumer spending and the purchase of new homes,” he said.

For 15-year fixed-rate mortgages, a popular option for refinancing, rates decreased to 4.73 percent this week, the lowest level since Freddie Mac began tracking these rates in 1991. Last week’s rate was 4.84 percent.

Rates for one-year adjustable mortgages, also went down this week, falling to 3.61 percent, another new low, from 3.67 percent last week. Freddie Mac’s records on one-year ARMs go back to 1984.

Low mortgage rates also propelled home-mortgage refinancing activity to a record level last year, something that has played a key role in supporting consumer spending. Consumers, the main force keeping the economy going, used the money saved on their monthly mortgage payments to make other purchases.

The Mortgage Bankers Association of America reported that refinancing activity accounted for 76 percent of all mortgage applications filed last week, up from 72.4 percent the week before.

“Interest rates are now at 45-year lows, and consumers are definitely taking advantage of these rates,” said Phil Colling, an economist with the association. “MBA now expects 2003 to be yet another record year in terms of mortgage originations.”

This week’s mortgage rates do not include add-on fees known as points. Each loan type carried an average fee of 0.7 point this week.

A year ago, rates on 30-year mortgages averaged 6.81 percent, 15-year mortgages were 6.28 percent and one-year adjustable mortgages stood at 4.85 percent.

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On the Net:

Freddie Mac: http://www.freddiemac.com

AP-ES-05-22-03 1448EDT