Interest rates on fixed-rate mortgages dropped sharply this week, with the lowest mortgage rates on record reported for15-year home loans.

Average rates on both 30- and 15-year fixed-rate mortgages dropped by one-tenth of a percentage point this week, with 15-year loans setting a new record low of 3.11 percent in the weekly Freddie Mac rate survey.

Interest rates on the standard 30-year fixed-rate mortgage fell to 3.88 percent in the Freddie Mac survey, barely above their all-time low of 3.87 percent reached in February. Last week the 30- and 15-year rates stood at 3.98 percent and 3.21 percent, respectively.

Adjustable-rate mortgages (ARMs) were largely unchanged, with average initial rates on 5-year ARMs down a single basis point to 2.85 percent, down from 2.86 percent previously. All rates in the survey included 0.7 points in fees and discounts.

It was the third consecutive week in which interest rates on fixed-rate mortgages declined.

The drop in rates followed a weaker-than-expected employment report on Monday, which triggered a drop in long-term yields on Treasury bonds, with mortgage rates following. The 120,000 new jobs the government reported for March were only half of what economists were expecting.

At the same time, the Federal Reserve reported on Wednesday that hiring was steady or increasing slightly across most of the nation. Generally speaking, mortgage rates tend to rise on good economic news and fall on more pessimistic reports.

Published on February 29, 2008