Mortgage rates drop again; 30-year average dips to 4.71%

And if it wasn't enough news to buyers that this truly is the time to buy, then check out this article. The interest rates dropped again! You know they will rise soon enough...

NEW YORK (AP) — Rates on fixed mortgages dipped for a second straight week as Treasury yields fell.

Freddie Mac said Thursday that the average rate on 30-year mortgages dropped to 4.71% this week from 4.77% the previous week. It hit a 40-year low of 4.17% in November.

The average rate on 15-year loans slipped to 4.08% from 4.13%. It reached 3.57% in November, lowest on records starting in 1991.

After the December employment report came in weaker than expected, investors sought safety in Treasury bonds, driving up prices and lowering the yields. Mortgage rates tend to track the yield on 10-year Treasury notes.

Rates had been rising since November, when investors started shifting money out of Treasurys and into stocks on expectations of faster economic growth and higher inflation. Bond prices tend to fall and yields to rise on inflation fears because inflation erodes bonds' fixed income stream.

The recent dip in rates has persuaded some borrowers to refinance, but would-be home buyers remain hesitant. The number of homeowners looking to refinance rose last week, the Mortgage Bankers Association said Wednesday. But the ranks of people applying for a purchase mortgage slipped from the week before.

Mortgage rates aren't expected to revisit last year's historically low rates unless the economy takes a sharp turn for the worse. And even if rates do fall sharply, low mortgage rates did little last year to spark home sales.

Higher rates are just another obstacle facing the beleaguered housing market. High unemployment, elevated foreclosures and falling home prices are other drags on the market's recovery.

RealtyTrac said Thursday that banks took back more than 1 million homes last year, the most on records dating back to 2005. One in 45 U.S. households received a foreclosure filing in 2010, up 1.67% from the year before. The foreclosure listing firm expects bank repossessions to peak this year at 1.2 million.

MORE: On December and 2010 foreclosures

Foreclosured homes typically sell at a steep discount of up to 50% in some of the hardest-hit regions. That lowers prices of other homes in the area. Experts predict prices will drop nationally another 5% to 10% before bottoming out midyear.

To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.

The average rate on five-year adjustable-rate mortgages slipped to 3.72% from 3.75%. The five-year hit 3.25% last month, lowest rate on records dating back to January 2005.

The average rate on one-year adjustable-rate home loans fell to 3.23% from 3.24%.

The rates do not include add-on fees, known as points. One point is equal to 1% of the total loan amount. The average fee for the 30-year loan in Freddie Mac's survey was 0.8 point. The average fee for 15-year fixed loans and five-year ARMs was 0.7 point, and the fee for 1-year ARMs averaged 0.6 point.