WASHINGTON (AP) — Rates on 30-year mortgages fell this week to the lowest level on record after the Federal Reserve launched a new effort to assist the staggering U.S. housing market.

Mortgage finance giant Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages dropped to 4.85 percent this week, from 4.98 percent last week. It was the lowest in the history of Freddie Mac's survey, which dates back to 1971 and was down a full percentage point from a year ago.

The previous record low of 4.96 percent was set in the week of Jan. 15. Rates fell after the Fed last week said it will pump $1.2 trillion into the economy in an effort to lower rates on mortgages and loosen credit.

Rates on 30-year mortgages traditionally track yields on long-term government debt.

Though the yield on the benchmark 10-year Treasury note initially plunged by about 0.5 percentage points after the Fed's move, lenders did not pass the entire drop on to borrowers. Bond yields rose after worries about what some saw as lackluster demand at a government debt auction Wednesday.

"There was a honeymoon effect initially" after the central bank's announcement, said Greg McBride, senior financial analyst with Bankrate.com. "The reality of large government deficits and the need for substantial government borrowing is setting in with investors."

Mortgage applications surged last week, mostly from borrowers looking to refinance and save money on their monthly payment. The Mortgage Bankers Association said Wednesday its weekly application index climbed more than 30 percent for the week ended March 20.

Nearly 80 percent of applications came from borrowers seeking to refinance home loans at lower rates, rather than purchase homes.

In Freddie Mac's survey, the average rate on a 15-year fixed-rate mortgage dropped to 4.58 percent this week, down from 4.61 percent last week.

Rates on five-year, adjustable-rate mortgages fell to 4.96 percent, compared with 4.98 percent last week. Rates on one-year, adjustable-rate mortgages rose fell to 4.85 percent, from 4.91 percent.

The rates do not include add-on fees known as points. The nationwide fee averaged 0.7 point last week for all mortgages in Freddie Mac's survey except for one-year adjustable mortgages, which had an average fee of 0.6 point.