Mortgage rates keep falling

This post comes from Marilyn Lewis of MSN Money.

Mortgage rates fell again this week, says Freddie Mac, the government-run mortgage agency that surveys the market each week.

•  Check mortgage rates at historic lows

The average price of a 30-year mortgage dropped to 4.42%, from 4.44%. Buyers are paying an average of 0.7 point for that rate. This time last year, the mortgage rate was 5.12%, which seemed pretty low back then.

Amazingly, you can get a 15-year fixed-rate loan for under 4% -- 3.90% this week, which is down from last week's rate of 3.92%. Buyers are paying an average of 0.6 point. This time last year, the same loan cost 4.56%. Post continues after video.

These are prices not seen since 1953. Since the government started keeping track in 1949, the lowest 30-year fixed-rate was 4.08%, in 1950. On the high end, mortgage rates spiked past 18% in the early 1980s. See mortgage interest rates between 1949 and 2008 in this .pdf chart by The Sarasota (Fla.) Herald-Tribune.

The action: Short-term loans

ARMs (adjustable-rate mortgages) are staying flat. Reports the Freddie Mac newsroom:

• Five-year Treasury-indexed hybrid ARMs averaged 3.56%, with buyers paying an average 0.6 point -- unchanged from last week. A year ago, this loan averaged 4.57%.
• One-year Treasury-indexed ARMs averaged 3.53%, with an average 0.7 point -- also unchanged. Last year, the cost was 4.69%.

As we've pointed out before, even at these bargain rates, the market of qualified buyers seems tapped out, and few people are snapping up 30-year mortgages or refinance loans. Also, with home prices falling and about a quarter of homes worth less than their mortgages, those owners would have to contribute cash to pay off the old loan before they could refinance.

• Calculate your home equity

Much of what action there is is in the short-term mortgages. USA Today reports:

Nearly a third of borrowers refinancing fixed 30-year loans in April through June picked loans with 15- or 20-year terms, according to mortgage finance giant Freddie Mac. It was the highest share since 2004.

And why not? If you've got a more expensive mortgage, there's a chance you can refinance into a shorter loan and, for roughly the same payment, build equity faster and pay off the mortgage more quickly.

Also, there seems to be a demographic push to pay off the house, with experts advising people to enter retirement debt-free. (See "Your get-ready-to-retire checklist.") The oldest members of the huge baby boom generation now are 64; the youngest are 46. From USA Today:

Peter Iche, president of Carthage Federal Savings and Loan Association in Carthage, N.Y., says he's seen an increase in people who are approaching retirement refinancing to shorter-term loans.

"They realize that they can afford a heavier payment," he says. "They're getting closer to retirement where they are willing to suck it up for a few years."

Right for you?

But is this a good idea for you? Take the big picture into account. Here are some tools to help make the decision:

• Run your retirement numbers here, to get an idea what your income will be.
• What can you afford to spend? Make home-loan affordability calculations here.
• Keep watching mortgage rates.
• Figure out if refinancing is worth it for you.

Also, it's important to consider:

• Your monthly payment may well rise if you refinance into a shorter-term mortgage. That means you'd need to show a higher monthly income to qualify than for a 30-year loan.
• You can cook up your own plan to pay off your mortgage more quickly just by stepping up your payments.
• There may be reasons why you shouldn't rush to pay off the mortgage, including the chances you'll get a better long-term payout from contributing to a work-place retirement account.

More from MSN Money:

• Refinancing soars, but homes aren't selling
• Nothing-down mortgages are back
• Mortgage rates at new low -- again
• Recovery nears key danger zone
• FHA hikes its fees