U.S. mortgage rates rose slightly in the latest week but still remained at historically low levels that should spur home loan demand and help the hard-hit U.S. housing market recover.

Interest rates on U.S. 30-year fixed-rate mortgages averaged 5.14 percent for the week ending August 27, up from the previous week's 5.12 percent, which was the lowest level in three months, according to a survey released on Thursday by home funding company Freddie Mac.

The mortgage rate was also significantly higher than the record low of 4.78 percent set the week ending April 2. Freddie Mac started its Primary Mortgage Market Survey in 1971.

Mortgage rates held above 5 percent for a 13th straight week.

Leif Thomsen, CEO of Mortgage Master, in Walpole, Massachusetts, said the government can be credited for helping keep mortgage rates steady through its purchases of Treasuries, agency MBS and agency debt.

The buying helps to steady things and it looks like mortgage rates will not be going anywhere drastic any time soon, he said. We're at a very nice level for mortgage rates right now and they are helping the purchase market in a big way.

Mortgages interest rates typically play less of a role in home purchase loan demand than they do in refinancings. Indeed, applications for refinancings have recently jumped.

Long-term mortgage rates were barely changed this week, remaining historically low, which is helping to sustain a high level of affordability in the home-purchase market, Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

Treasury yields, which determine mortgage rates, have see-sawed recently, with mortgage rates responding in kind.

Attractive rates are a positive for the U.S. housing market, which has shown some signs of stabilization, with sales rising and price declines moderating in many regions of the country. In fact, home prices in some regions have risen.

Thirty-year mortgage rates had been on a downward trend for most of this year after the Federal Reserve unveiled its plan to buy mortgage-backed debt in late November. But the Fed met resistance in the bond market in recent months.

The U.S. government has embarked on an aggressive plan to bring mortgage rates down to levels that would spur demand and help the hard-hit housing market recover.

The Fed has set a goal to buy up to $1.25 trillion of agency MBS, $300 billion of Treasuries and $200 billion of agency debt in 2009. The Fed said it expects to have purchased the entire amount of Treasuries by the end of October, while its purchases of agency MBS and agency debt are scheduled to be completed by year-end.

The battered U.S. housing market, which has suffered the worst downturn since the Great Depression, is both the source and a major casualty of the credit crisis. A recovery of the market could hasten a turnaround for the U.S. economy.

OTHER RATES MIXED

Freddie Mac said 15-year fixed-rate mortgages averaged 4.58 percent in the latest week, up from 4.56 percent the prior week.

One-year adjustable-rate mortgages, or ARMs, were unchanged at 4.69 percent last week. Freddie Mac said the 5/1 ARM, set at a fixed rate for five years and adjustable each year after, averaged 4.67 percent, compared with 4.57 percent.

A year ago, 30-year mortgage rates averaged 6.40 percent, 15-year mortgages 5.93 percent and the one-year ARM was at 5.33 percent. A year ago, the 5/1 ARM averaged 6.03 percent.

Lenders charged an average of 0.7 percent in fees and points on both 30-year and 15-year mortgages, unchanged from the previous week.

The 5/1 ARM fees and points were 0.6 percent, unchanged from the previous week. The one-year ARM fees and points were 0.6 percent, up from 0.5 percent the previous week.

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