Mortgage rates keep plunging: 15-year dips below 3%

NEW YORK (CNNMoney) -- Mortgage rates continued to plunge to new lows this week, with interest rates on the 15-year fixed rate mortgage dipping below 3% for the first time on record.

The 30-year fixed mortgage, the most popular mortgage product, fell by 0.03 percentage points to 3.75%, setting yet another record for the fifth week in a row, according to a weekly survey by Freddie Mac. Last year, 30-year loans averaged 4.55%. The new low can save borrowers about $47 a month for every $100,000 borrowed. Over a 30-year term, that comes to $16,756.

Rates on the 15-year fixed mortgage, which is popular among those looking to refinance, fell to 2.97% -- the first time it has dropped below 3% since Freddie Mac began tracking the weekly data. Down from 3.74% a year ago, the new 15-year rate would lower borrowing costs to $689 a month for every $100,000 borrowed, a $37 savings compared to last year.

The continued slide in mortgage rates is, in part, due to ongoing economic turmoil in Europe, according to Freddie Mac's chief economist, Frank Nothaft.

"Market concerns over tensions in the Eurozone led to a decline in long-term Treasury bond yields helping to bring fixed mortgage rates to new record lows this week," he said.

Rates are almost half what they were at the peak of the housing bubble in mid-2006. At the time, the average interest rate was about 6.75% for a 30-year loan.

Meanwhile, home prices have hit new post-bubble lows, according to the most recent S&P/Case-Shiller home price index of 20 major markets. Home prices have not been this low since mid-2002.

Much lower home prices, along with affordable mortgages, should help to bolster the housing market, but don't expect a vigorous recovery to follow, said Mike Larson, a housing market analyst for Weiss Research.

"The less you have to pay for a house the better that is but it's not a cure all," he said. "Despite lower interest rates, there is still a weak economy and weak job market. That's not good for underlying housing demand."