(Mortgage rates report updated with data from RateWatch and MainStreet.)
NEW YORK (TheStreet) -- Mortgage rates fell to a record lows last week, but homebuyers remain on the sidelines, according to data released Thursday.

The average rate on a 30-year fixed mortgage decreased to 4.12% over the past week,

Freddie Mac

(FMCC)

said, down from 4.22% in the prior week. That marks the lowest rate since the firm began keeping records in 1971. The average 15-year rate fell to 3.33% from 3.39%. Freddie Mac spokesman Chad Wandler said home loan rates are at their lowest levels since the 1950s, according to data from the National Bureau of Economic Research.

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Certain loan customers may get better rates from credit unions than from banks

, though banks tend to have an advantage when it comes to mortgage rates, charging a 3.32% APR on 60-month adjustable rate mortgages to the credit unions' 3.77%, according to RateWatch data as reported by

MainStreet

last month. (A

comparison of the two institution types on fixed mortgages

conducted in December found a statistical dead heat, though some experts argued that credit unions have an advantage in that they tend to charge lower fees.) But credit unions won on the other loan rates used in calculating the

Credit Power Index

, including personal unsecured loans (charging 10.49%, to 12.54% at banks) and 36-month home equity loans (5.61% at credit unions, 6.75% at banks).

The Mortgage Bankers Association said Wednesday that mortgage application activity fell 4.9% for the week ending Sept. 2. The refinance index fell 6.3% week-over-week as loan rates fell, indicating that even existing homeowners are decreasingly looking to take advantage of low mortgage rates.

>> No Housing Turnaround Anytime Soon: Analyst

The MBAA's report showed that the average rate on a 30-year fixed mortgage last week fell to 4.23%, from 4.32%. It was the second-lowest rate in the survey's history while its 15-year rate, at 3.41%, marked a new record low.

>> Flagging Economy Gives 15-Year Mortgages New Life

"Despite these rates however, refinance application volume fell for the third straight week, and is more than 35% below levels at this time last year," said Mike Fratantoni, MBA's Vice President of Research and Economics. "Purchase application volume remains relatively flat at extremely low levels, close to lows last seen in 1996."

A total of 77.1% of all loan applications last week were for refinancing existing mortgages, down slightly from 77.8% in the prior week, the MBAA reported.

"The housing market remains challenging primarily due to uncertainty caused by general domestic economic and political concerns, stock market volatility and turbulent international economic conditions," said Ara Hovnanian, CEO of homebuilder

Hovnanian Enterprises

(HOV) - Get Hovnanian Enterprises, Inc. Class A Report

, on Wednesday. "We see very few indicators that any recovery in the housing market has begun."

Late Wednesday,

Hovnanian

said its third-quarter losses narrowed as fewer land-related charges helped offset much lower revenue. New-home orders jumped 33% on a year-over-year basis.

Last year's quarter reflected sluggishness following the expiration of federal tax credits for homebuyers.

Hovnanian shares were 1.2% lower at $1.63 in late-afternoon trading Thursday. Elsewhere in the homebuilder sector, stocks were mostly lower, including the

SPDR S&P Homebuilders

(XHB) - Get SPDR S&P Homebuilders ETF Report

TheStreet Recommends

and

iShares Dow Jones US Home Construction,

(ITB) - Get iShares U.S. Home Construction ETF Report

exchange-traded funds that track the sector. The ETFs remain around 70% and 80%, respectively, off their early 2006 peaks.

Among individual builders,

PulteGroup

(PHM) - Get PulteGroup, Inc. Report

fell 1.9%,

D.R. Horton

(DHI) - Get D.R. Horton, Inc. Report

lost 3.6%,

Toll Brothers

(TOL) - Get Toll Brothers, Inc. Report

shed 2.4% and

Lennar

(LEN) - Get Lennar Corporation Class A Report

, largely considered a leader among the homebuilders, fell 2.4%.

--

Written by Miriam Marcus Reimer in New York.

>To contact the writer of this article, click here:

Miriam Reimer

.

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@miriamsmarket

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