Mortgage rates held stable this week as doubts about the strength of the economic recovery helped keep worries about inflation in check.

Freddie Mac’s weekly Primary Mortgage Market Survey showed rates on 30-year fixed-rate mortgages averaging 3.9 percent with an average 0.8 point for the week ending April 19.

That’s up slightly from 3.88 percent last week, but down from 4.8 percent at the same time a year ago. Rates on 30-year fixed-rate mortgages hit an all-time low in records dating to 1971 of 3.87 percent during the first three weeks of February.

Rates on 15-year fixed-rate loans, a popular refinancing option, averaged 3.13 percent with an average 0.7 point, up from 3.11 percent last week but down from 4.02 percent a year ago. Last week’s rate was a new low for 15-year mortgages in Freddie Mac records dating to 1991.

Rates on five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans hit a new low this week, averaging 2.78 percent with an average 0.7 point. That’s down from 2.85 percent last week and 3.61 percent a year ago.

For one-year Treasury-indexed ARM loans, rates averaged 2.81 percent with an average 0.6 point, up from 2.8 percent last week, but down from 3.16 percent a year ago. Rates on one-year ARMs hit an all-time low in records dating to 1984 of 2.72 percent during the week ending March 1.

Looking back a week, a separate survey by the Mortgage Bankers Association showed demand for purchase loans was down a seasonally adjusted 11.2 percent during the week ending April 13 compared to the week before. Purchase loan requests were down 13.9 percent from the same time a year ago.

MBA Chief Economist Jay Brinkmann said most of the decline was due to a 23 percent decline in applications for FHA purchase loans, following an increase in FHA mortgage insurance premiums. Demand for conventional purchase loans was down only slightly, he said.

Brinkmann said renewed concerns about the European debt crisis led to a drop in rates last week, and that requests for refinancings were up 13.5 percent. About 32 percent of refinance application volume was for the Home Affordable Refinancing Program (HARP), which was recently revamped to provide greater incentives to lenders.

In their latest forecast, economists at Fannie Mae say they expect rates on 30-year fixed-rate mortgages will reach 4.2 percent by the end of this year and continue a gradual climb to 4.5 percent by the end of 2013.

Mortgage rates depend on investor demand for mortgage-backed securities, which fund nine out of 10 mortgage loans.

In times of economic uncertainty, investors view mortgage-backed securities backed by the government as a safe haven, comparable to Treasury bonds. When economic growth and inflation pick up, such investments fall out of favor, reducing their prices and pushing up their yields.

During the downturn, the Federal Reserve bought $1.25 trillion in mortgage-backed securities, helping bring rates on 30-year fixed-rate loans from above 6 percent in late 2008 to just under 5 percent by the time the program wound down in March 2010.

Fannie Mae economists say that while economic growth has slowed, they don’t expect the Fed to implement another round of large-scale asset purchase or another round of "quantitative easing" (QE3).

"However, the weak March employment report served as a reminder that circumstances can change quickly, and additional easing cannot be ruled out," Fannie Mae economists Doug Duncan and Orawin Velz noted in commentary accompanying their latest forecast.

The March employment report showed the economy creating only 120,000 jobs, less than half of the average monthly gain during the three previous months and the smallest gain in five months.

That setback "should not necessarily be interpreted too negatively," Duncan and Velz advised, noting that initial jobless claims fell to 357,000 during the last week of March, a new low for the recovery and not far above the average reading of about 345,000 over the past 25 years.

Fannie Mae economists expect home sales will be up 7.8 percent this year, to 4.92 million. Sales of existing homes are expected to grow by 7.6 percent in 2012, to 4.58 million, followed by 1.9 percent growth in 2013.

Sales of new homes are expected to grow by 10.5 percent this year, to 338,000 homes, and an additional 27.1 percent in 2013, to 430,000 homes. That would still be well below recent historic norms.

Single-family housing starts declined sharply in February, reversing their gains during the previous two months.

Although multifamily homebuilding posted a strong increase for a second consecutive month, single-family homebuilding "has performed worse than any of the previous four economic expansions," Duncan and Velz said.

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