30-year mortgage below 4 pct. for first time ever (AP)

WASHINGTON – The average rate on the 30-year fixed mortgage this week fell below 4 percent for the first time ever, to 3.94 percent.

For those who can qualify, it's an extraordinary opportunity to buy a home or refinance.

On Thursday, Freddie Mac said the average rate dropped from 4.01 percent last week, the previous low. The average rate on a 15-year fixed loan, a popular refinancing option, dipped to 3.26 percent, also a record. The 15-year loan has fallen for six straight weeks.

Mortgage rates are now lower than they were in the early 1950s, when the average rate reached 4.08 percent for a few months, according to the National Bureau of Economic Research. Back then, mortgages typically lasted just 20 or 25 years.

Still, rates have been below 5 percent for all but two weeks in the past year and that has done little to boost home sales. This year is shaping up to be among the worst for sales of previously occupied homes in 14 years.

"Interest rates are obviously not an impediment to housing. It's uncertainty about the economy, about jobs, about incomes," said Mark Vitner, senior economist at Wells Fargo. "It's not a question of affordability. It's simply a lack of wherewithal to buy a home or a lack of confidence to commit to buying one."

Many people are reluctant to take the risk in this market. High unemployment, scant pay raises and heavy debt loads are deterring many would-be buyers.

Others can't qualify for the historically low rates. Banks are insisting on higher credit scores. And many want first-time buyers to put down 20 percent. Few people have that much cash or home equity to satisfy the requirement.

"Considering how far mortgage rates have fallen, we'd expect to see more people refinancing and buying," said Celia Chen, director of housing economics at Moody's Analytics. "It's still the lack of jobs and the difficult credit environment that's pushing most people away."

Total mortgage applications fell more than 4 percent this week from the previous week, according to the Mortgage Bankers Association. Refinancing applications declined more than 5 percent.

Mike Fratantoni, the group's vice president of research and economics, said potential borrowers "largely remained on the sidelines" and were "unimpressed" by the lowest rates in decades.

Mortgage rates have tumbled because they tend to track the yield on the 10-year Treasury note. The yield has fallen in recent weeks, largely because investors are worried about the U.S. economy and the debt crisis in Europe. So they have shifted their money out of stocks and into the relative safety of Treasurys.

And they could fall even further now that the Federal Reserve has started shuffling its investment portfolio to try to lower long-term rates.

A drop in mortgage rates could provide some help to the economy if more people could refinance. When people refinance at lower rates, they pay less interest on their loans and have more money to spend.

Consider a homeowner who owes $250,000 and is paying 5.09 percent on a 30-year fixed mortgage. That was the average rate being offered in January 2010. Refinancing the loan at 3.94 percent could save him or her more than $2,000 a year.

But many homeowners with good jobs and stable finances have already refinanced. Until recently, any rate below 5 percent was considered extraordinarily low. Just five years ago, the best rate for a 30-year fixed loan was around 6.5 percent; a decade ago, it was near 8 percent.

Most economists say rates would need to fall at least a full percentage point before it makes sense to refinance again. The reason is homeowners typically pay a few thousand dollars in closing costs when they refinance. And the low rates being offered don't include extra fees, known as points, which many borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for the 30-year and 15-year rose to 0.8. The average fees for both the five-year and one-year adjustable-rate loans were 0.6 and 0.5, respectively.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.

The average rate on a five-year adjustable-rate mortgage fell to 2.96 percent. The average for the one-year adjustable-rate mortgage ticked up to 2.95 percent.

AP Business Writer Dan Wagner contributed to this report.

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