April 2 (Bloomberg) -- Fixed mortgage rates in the U.S. fell to a record low for the second consecutive week, signaling that Federal Reserve Chairman Ben Bernanke’s effort to spur the housing market is gaining traction.

The 30-year rate dropped to 4.78 percent from 4.85 percent a week earlier, the lowest since records began in 1971, Freddie Mac said today in a statement.

Rates are falling to historic lows as the Federal Reserve ramps up purchases of mortgage-backed bonds to support home lending. Mortgage applications in the U.S. rose for a fourth consecutive week as a decline in borrowing costs prompted more refinancing.

“Lower rates will help increase demand for homes,” said Celia Chen, senior director at Moody’s Economy.com in West Chester, Pennsylvania. “We need to see stronger demand for homes to help end the housing correction.”

The Fed’s efforts to expand lending “should make new consumer, business, and mortgage loans more available, at lower cost,” Bernanke said in a March 20 speech to a Phoenix banking conference.

Bernanke’s Comments

Government purchases of mortgage securities are helping to reduce the interest rates that Fannie Mae and Freddie Mac buyers require on home loans “thereby lowering the rate at which lenders, including community banks, can fund new mortgages,” Bernanke said.

The 30-year fixed mortgage rate may bottom at 4.4 percent, said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis.

“We’re not going to see mortgage rates a lot lower than they are today,” Anderson said. “It’s going to be a lot harder to push rates lower from here.”

The average rate on a 15-year fixed mortgage also hit a record low of 4.52 percent, down from 4.58 percent, McLean, Virginia-based Freddie Mac said today.

Homebuilding stocks rallied 25 percent in March on speculation interest rates will lead buyers back into the market. Los Angeles-based KB Home rose 61 percent, the most of any builder, after saying orders increased for the first time in three years. Chief Executive Officer Jeffrey Mezger said the company’s net orders will likely rise for the rest of the year.

Still, obtaining financing even with low mortgage rates is difficult, said Grant Stern, president of Morningside Mortgage Corp. in Bay Harbor Island, Florida.

‘Tough’ Environment

Consumers with 25 percent down payments and credit scores of 680 or higher can get a 30-year fixed-rate as low as 4.5 percent. It’s difficult for would-be homebuyers with credit scores below 620 out of a possible 850 to obtain a mortgage, Stern said.

“It’s very tough,” he said.

The Federal Reserve said last month it would buy up to an additional $750 billion of mortgage-backed securities in an effort to lower rates by reducing the supply of outstanding mortgage bonds. Boosting the price of mortgage-backed securities and lowering their yields would allow banks to reduce the rates on new mortgages and still sell mortgage securities at a profit.

Falling mortgage rates and lower prices have lifted demand for U.S. homes. The number of Americans signing contracts to buy previously owned homes rose 2.1 percent in February, the National Association of Realtors said yesterday. The index of signed purchase agreements, or pending home resales, rose to 82.1 from 80.4 in January.

The Mortgage Bankers Association’s index of applications rose 3 percent to 1,194.4 in the week ended March 27 from 1,159.4 the prior week. The group’s refinancing gauge gained 3.7 percent, following a 41 percent gain the prior week. The purchase index rose 0.1 percent.

To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net.

Last Updated: April 2, 2009 14:17 EDT