Mortgage interest rates are holding steady at record lows, creating an ideal scenario for home buyers, in particular first-time ones.

Jerry Vigorito, senior vice president Atlantic National Mortgage in Westport, sees several influences holding mortgage rates down and setting the backdrop to spur the slumping housing industry.

“First-time home buyers are fueling the housing market,” Vigorito said. “There’s no pressure for interest rates to rise and those first timers can take advantage of it to jump into the market.”

At the moment, first-time home buyers are sitting in the driver’s seat. Not only can they take advantage of the 30-year fixed rate holding steady at about 4.75 percent but also enjoy a federal tax credit of $8,500. On top of those advantages, throw in low housing prices and the first-time buyers can get into more house than they might have dreamed of.

However, the Federal tax credit dries up at the end of this month which could sidetrack housing market sales. The jury is still out on what will happen. Adjustable mortgages are also holding, dipping under the 4 percent range for three, five and seven year terms.

But the Mortgage Bankers Association, a national organization representing the real estate and finance industries, reported that the flurry of mortgage applications is slowing because of the end of the Federal tax credit program. The MBA report showed a decrease of 12.2 percent in mortgage applications at the beginning of June.

Edward Deak, professor of Economics at Fairfield University, notes that several strong influences continue to bog down the housing market and are likely to continue for the time being.

•More stringent loan underwriting rules – Because of the downturn in the economy and rise in foreclosures, lenders are following stricter loan guidelines.

•Foreclosures and distressed properties continue to increase — Banks are also expected to put more foreclosed properties onto the market in the months ahead.

•Lack of confidence in the economy. The unemployment rate continues to hover around 10 percent nationally. As a result, people are reluctant to make a major commitment, such as purchasing a home.

Even though the housing industry struggles to gain traction, it should come as little surprise based on the magnitude of the global recession that settled in last year, Deak said. This downturn has proven to be one of the worst since the Great Depression.

Putting the Federal tax credit impact aside, Vigorito has seen an easing of the stringent credit guidelines that should help all home buyers. “I’ve seen credit checks ease a bit,” Vigorito said. “It’s still drastically different than it used to be. A lot of products are no longer available. But the low interest rates are helping everyone.”

Vigorito points out that many existing home owners are taking advantage of low fixed rates by refinancing, which has sparked the mortgage industry.

John Gerlach, professor of Finance at Sacred Heart University, speculates that the prolonged low interest rates could inspire more buyers to invest in the housing market. This trend could go a long way to shoring up the sagging housing industry.

“The prices of homes have come down enough that people will start to buy them as investments,” Gerlach said. “If I had to pick a highly valued investment market over the next three years it would be residential housing. This could slowly turn the market around.”

Vigorito is optimistic about an uptick in the housing market, but is aware of speculation that the possibility of creeping inflation could yank the rug from under the resurging mortgage industry.

Some economic critics fear that government spending could ignite inflation down the road. Historically, rising inflation, in turn, sparks a rise in interest rates.

“There could be some winds of change in the future,” Vigorito said. “I’ve read that current fiscal policy spending could result in inflation which is usually poison to interest rates. Remember how interest rates climbed back in the [President] Carter years when inflation ran high.”

Anthony Macari, professor of Finance and head of the MBA Program at Sacred Heart University, sees interest rates holding steady for the foreseeable future, primarily because the economy is growing at such a slow rate.

“The underlying slowness of economic recovery should offset inflation,” Macari explained. “I believe mortgage rates will hold steady for now. Any threat of inflation is probably a longer term issue, maybe two to five years out.”

Diane Nelson, president of Independent Mortgage in Fairfield, views the mortgage scenario as stable for now. As long as the economy grows slowly, mortgages should hold steady, according to her.

“There’s no reason to raise rates,” Nelson said. “When you see things start to heat up and there are signs of a major recovery, there’s just no impetus to touch mortgage rates. When the economy is in gear that’s when you see rates go up to keep thing under control. At least that’s the theory. But I’m not a prognosticator or an economist, just a mortgage guy. It’s my view from the bottom.”