Mortgage rates for 30-year fixed loans fell this week to the lowest level since May, reducing borrowing costs for hesitant buyers as signs show the recession- plagued U.S. housing market may be bottoming.

The average 30-year rate fell to 5.12 percent from 5.29 percent, mortgage buyer Freddie Mac of McLean, Virginia, said today in a statement. The 15-year rate was 4.56 percent.

Falling home prices and a government tax credit for first- time buyers are bolstering tepid demand. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan rose 5.6 percent to 527 in the week ended Aug. 14, the Washington-based MBA said yesterday. Builders increased starts on single-family homes for a fifth straight month in July, the Commerce Department said Aug. 18.

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