30-year mortgage rate falls to record 3.53%

NEW YORK (CNNMoney) -- Mortgage borrowing got cheaper again this week, as rates on 30-year and 15-year fixed-rate loans fell to record lows.

The 30-year mortgage dropped to 3.53% from 3.56% last week, Freddie Mac said in its weekly report. The 30-year fixed rate has matched or hit new lows for 12 of the past 13 weeks. Twelve months ago, the 30-year fixed rate stood at 4.52%.

Meanwhile, the 15-year fixed rate fell to 2.83% from 2.86% last week, Freddie Mac said. A year ago, it was 3.66%.

The consistently low rates are having a positive impact on the still-recovering housing market, according to Federal Reserve chairman Ben Bernanke.

"In part because of historically low mortgage rates, both new and existing home sales have been gradually trending upward," he said in testimony before Congress on Tuesday.

First-time homebuyers and others who want to minimize their monthly payments usually choose 30-year fixed-rate mortgages. Those who take out a $200,000 loan at the current rate would have payments of $901 a month and would pay less than $125,000 in interest over the life of the loan.

For some trade-up buyers and many homeowners looking to refinance their loans, the 15-year fixed-rate mortgage is the more popular choice. The higher payments enable borrowers to pay the loan off quicker and minimize the total interest paid.

At the current rate, a borrower financing $200,000 with a 15-year mortgage would pay $1,365 a month and spend a total of just under $46,000 in interest.

Rates have been in a steady, slow decline all year, going above 4% for the 30-year only once, back in March. Otherwise, the weekly average rate has moved between 3.53% and 3.99%.

According to Keith Gumbinger of HSH.com, a mortgage information company, that kind of stability helps homebuyers plan, execute and complete their transactions.

"Knowing that the mortgage rate you will get at the end of the buying transaction will be the same or even better than when you started can provide a potential homebuyer a strong boost of confidence, making it easier to want to start the process in the first place," he said.

The flip side is that loans are often hard to get. Since the mortgage meltdown began in 2007, banks have moved from very liberal to very strict lending standards. Now, they closely scrutinize employment records, income and other debt, which can disqualify many borrowers.

In 2009, with default rates soaring, mortgage giants Fannie Mae and Freddie Mac hiked minimum credit scores for conventional loans to 620 from 580, presenting another potential hurdle.

Banks are also more careful about the value of the property backing the mortgage.

About 20% to 25% of home sales in contract don't close because the homes fail to appraise at the value needed to obtain a mortgage or because of inspection problems, according to Lawrence Yun, chief economist for the National Association of Realtors.

"The appraisal issue is very frustrating," he said.

Many of those sales eventually complete but may require buyers to come up with extra cash or sellers to drop their prices to reflect the conservative appraisal values.