NEW YORK (CNNMoney.com) -- Mortgage rates fell for the second week in a row, finance firm Freddie Mac said Thursday, as the weakening economy resulted in the slowest pace of home purchase applications in nearly eight years.
Freddie Mac said 30-year fixed-rate mortgages averaged 6.14% this week. That's down from 6.20% last week and below the 6.24% rate at this time last year.
Rates for 30-year fixed-rate mortgages have been at 6% or higher for five consecutive weeks. Between the week of Oct. 9 and Oct. 16, the 30-year fixed-rate mortgage posted its biggest weekly jump since April 1987, rising from 5.94% to 6.46%
"Long-term mortgage rates fell slightly this week as signs the overall economy is weakening brought interest rates down market-wide," according to a statement by Frank Nothaft, Freddie Mac vice president and chief economist.
Rates on 15-year fixed-rate mortgages fell to 5.81% from 5.88% last week. A year ago, the rate was 5.88%.
The five-year adjustable-rate mortgage fell to 5.98%, from 6.19% last week. A year ago, the rate was 5.96%.
The rate on a one-year adjustable-rate mortgage rose to 5.33% from 5.25% last week. At this time last year, the rate was 5.50%.
Mortgage applications for home purchase loans fell during the last week in October to the slowest pace since the week of Dec. 29, 2000, according to data from the Mortgage Bankers Association.
On Thursday, the head of the Senate Banking Committee said banks receiving money as part of the $700 billion federal bailout must increase their lending to businesses and consumers.
Banks are failing to use public funds to make credit more available and to help troubled homeowners, said Sen. Christopher Dodd, D-Conn.
A recent survey of senior loan officers from the Federal Reserve found that about 70% of banks raised their lending standards for prime mortgages, and about 90% of banks that offer nontraditional mortgages did so as well.
In September, Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500) were on the brink of failure, having racked up nearly $12 billion in losses from declining home prices, mortgage delinquencies and foreclosures.
Federal officials assumed control of the firms and the $5 trillion in home loans they back. The Treasury put up as much as $200 billion to bail them out and placed them in a temporary "conservatorship" overseen by the Federal Housing Finance Agency.
By Lara Moscrip, CNNMoney.com contributing writer
November 13, 2008: 1:05 PM ET
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