NEW YORK, Dec 17 - U.S. mortgage rates rose for a second consecutive week but remained below 5 percent, a closely watched mortgage survey showed on Thursday, a key level that may boost home loan demand and help the housing market recover.

The lowest mortgage rates in decades and high affordability have helped the hard-hit housing market find some footing this year after a three-year slump.

Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 4.94 percent for the week ended Dec. 17, up from the previous week's 4.81 percent, according to a survey released by Freddie Mac (FRE.P) (FRE.N), the second-largest U.S. mortgage finance company.

Two weeks earlier the rate was at 4.71 percent, the lowest since Freddie Mac started the survey in 1971.

Many industry experts view 5 percent as a key psychological level. When rates drop below that threshold, demand for mortgages, particularly home refinancing loans, tends to rise. A year ago, 30-year mortgage rates averaged 5.19 percent.

Stephen Habetz, president of Threshold Mortgage in Westport, Connecticut, said there is a lot of uncertainty, and the meltdown over the past few years has made consumers cautious.

When you add to that the overwhelming lack of job security many people are feeling, you have an environment where many people are still feeling that the risks outweigh their potential gains, he said. It may be some time before the general public believes that the storm is over and that we aren't just lingering in the eye.

Hopefully, a few more months of stabilization will give home buyers the reassurance they need to participate in the market, he said.

The Mortgage Bankers Association on Wednesday said U.S. mortgage applications nudged higher last week. For details, double-click on [ID:nNYS007622]

Mortgage rates followed bond yields higher once again this week amid signs of an improving economy, Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

Mortgage rates are linked to yields on Treasuries and yields on mortgage-backed securities.

Freddie Mac said the 15-year fixed-rate mortgage averaged 4.38 percent in the latest week, up from 4.32 percent the prior week. For rates table, double-click on [ID:nWEQ003679]

One-year adjustable-rate mortgages (ARMs), were 4.34 percent in the latest week, up from 4.24 percent the prior week. The rate on the 5/1 ARM, set at a fixed rate for five years and adjustable each following year, was 4.37 percent, compared with 4.26 percent a week earlier.

A year ago, 15-year mortgages averaged 4.92 percent, the one-year ARM 4.94 percent and the 5/1 ARM 5.60 percent.

Freddie Mac, like its larger sibling, Fannie Mae (FNM.P) (FNM.N), is a mortgage finance company chartered by Congress that buys mortgages from lenders and packages them into securities to sell to investors or to hold in its own portfolio. Both companies were put into government conservatorship in September 2008.

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