BOSTON — Europe's debt crisis is translating into lower mortgage rates for Americans as investors fleeing to the refuge of U.S. bonds push borrowing costs close to December's record low.

The average U.S. rate for a 30-year fixed mortgage fell to 4.78 percent for the week that ended Thursday from 4.84 percent, Freddie Mac said Thursday. The record low is 4.71 percent. This week's average 15-year fixed rate was 4.21 percent, the mortgage finance company said.

Concerns about rising government deficits and debt in Greece, Portugal and Spain have devalued the euro and sent equity markets tumbling around the world. Investors seeking the safety of U.S. bonds including mortgage-backed securities are driving down home loan rates, said David Berson, the chief economist for PMI Group Inc. in Walnut Creek, Calif.

The more concern there is about Europe, the lower interest rates will go, said Berson. The 30-year rate might fall to a record in coming weeks, he said.

Applications to refinance home loans have jumped. The Mortgage Bankers Association's refinancing index rose 17 percent in the week that ended May 21, capping the biggest three-week gain in 14 months, the trade group said. Purchase applications fell to the lowest level since 1997 as the expiration of a federal homebuyer tax credit in April reduced sales.

Debt concerns in Greece started surfacing a few weeks after the March 31 conclusion of the Federal Reserve's $1.25 trillion mortgage-bond buying program. Greece's credit rating was cut to junk by Standard & Poor's in April, the first time a eurozone member lost its investment grade since the currency's 1999 debut.

The U.S. may actually be an unwitting beneficiary of the crisis in Europe, Federal Reserve Bank of St. Louis President James Bullard said Wednesday in London. This is because of the flight-to-safety effect that pushes yields lower in the U.S.

The yield on the benchmark 10-year Treasury note has fallen 0.38 percentage points in May, the most since a 0.71-point drop in December 2008.

The European debt crisis isn't the only cause for lower rates, said Mark Goldman, a mortgage broker with Cobalt Financial Corp. in San Diego. It's coming at a time when inflation is low, consumer confidence is increasing, and the labor market is starting to improve, Goldman said.

The forces that traditionally move the mortgage markets are helping to reduce borrowing costs too, he said.

The cost of living dropped 0.1 percent in April for the first decline in more than a year, the Labor Department said this month. Excluding food and fuel, the so-called core inflation rate was unchanged, capping the smallest 12-month rise in four decades.

Consumer confidence in May climbed to the highest level in two years, according to a report this week from the New York-based Conference Board. Payrolls increased by 290,000 in April, the most in four years, after a 230,000 gain in March, according to the Labor Department.

The decline in mortgage rates runs counter to conventional wisdom that rates would rise by half a percentage point after the end of the Fed's mortgage program, Goldman said.

The central bank began buying bonds guaranteed by government-controlled mortgage financiers Fannie Mae, Freddie Mac and Ginnie Mae in January 2009 with the aim of bolstering the housing market by reducing financing costs. The Fed purchased $1.25 trillion in bonds backed by home loan debt to pump cash into the market.

A lot of us were wondering who would be standing in the wings after the Fed's exit, Goldman said. We didn't factor in this mess in Europe.

Source: Bloomberg, Bob Willis and Anthony Feld