Like a lead weight in a vacuum, the national average interest rate on the 30-year fixed-rate loan continued its plunge, dropping through 7% to its lowest level in 25 years.

Driven by the 30-year Treasury bond's remarkable rally, the rate fell to 6.96% last week, according to HSH Associates of Butler, N.J.

"This is as good as it's going to get, I think," said Terrance Hodel, president of North American Mortgage in Santa Rosa, Calif.

Indeed, nobody in the mortgage industry is sure just how low rates may fall. Certainly, no one expected them to get this low. After all, the last time interest rates were at this level was in the summer of 1968, and at the time they were at a post-world War II high.

In June 1968, the Federal Home Loan Bank board index for home sales listed the average rate on a 30-year fixed-rate mortgage at 6.97%. In July, it rose to 7.10%.

Paul Paquin, an economist at the Federal National Mortgage Association, said there was no way to know whether rates have bottomed out.

"I'm an economist. But I don't have the slightest idea what interest rates are going to do and neither does anybody else."

Mr. Paquin said that the economy in the 1960's was "an entirely different world."

Home Sales Jump

Meanwhile, the precipitous drop in interest rates fueled a big jump in July in sales of existing homes, according to the National Association of Realtors. The jump to 3.88 million for the year brings the sales to their highest annualized level in 1993. The rate for July was up 14.8%.

The 3.7% jump was much sharper than expected, and is one of the few bright signs in an otherwise flat national economy, experts said.

The combination of low interest rates and a slight decrease in the price of an average home helped spur the increase, officials of the Realtors association said.

"Summer generally is busy, but this is extraordinary," association president William S. Chee said in a written statement. "More and more |sold' signs are going up."

The average price of a home in the United States in July was $109,200, down from $109,300 in June and up from $102,800 a year ago.

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