That was down from 5.97 percent last week, and the lowest since the week of Jan. 24, when it was at 5.48 percent.
Further drops could be on the way if the government launches an industry-backed plan to lower the rate on a 30-year mortgage to 4.5 percent by spending hundreds of billions to buy mortgage-backed securities issued by Fannie Mae and Freddie Mac .
That would follow an effort announced last week by the Federal Reserve, which is planning to purchase up to $600 billion of mortgage-backed securities and other debt issued by Fannie and Freddie and the Federal Home Loan Banks.
Those institutions don't make loans directly to consumers, but provide money to the mortgage market by packaging loans into investments.
The Fed's move caused rates to immediately drop by about a half-point, and many in the real estate industry hope rates will keep dropping as the government increases efforts to battle the credit crisis.
Rates "are now almost a full percentage point lower since the last week in October," Freddie Mac Chief Economist Frank Nothaft said in a statement.
Mortgage rates are sinking as Treasury yields, some of the most sensitive barometers of investor sentiment, have dropped to record lows this week as a torrent of bad economic news continues.
But as investors send yields down, they're also influencing the economy—driving interest rates so low that savers get punished and borrowers get a break.
Treasury buying has picked up and sent yields down because the economy is in a recession that investors believe will be long and deep.
Consumers already are taking advantage of the situation.