The bank said its Capped Advantage loan, which is tied to a certificate of deposit index, will be offered at an initial rate of 9.75%, down from 10%. The interest rate is the lowest mortgage rate from the bank since October, 1978. The bank also said it is lowering the rate on a second adjustable-rate home loan. "Interest rates generally are falling, and because of that our cost of funds is declining," said B of A economist Mike Salkin. He predicted, however, that economic activity will increase soon and drive interest rates back up. In a related development, the Federal Home Loan Mortgage Corp. reported that mortgage rates on conventional fixed-rate loans fell to an average of 12.27% in the week ended June 14, the lowest rate since August, 1980.