Mortgage rates are at their lowest point in more than two years. Too bad more people won't -- or can't -- take advantage.

The benchmark 30-year fixed-rate mortgage plunged 26 basis points, to 5.88 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.35 discount and origination points. One year ago, the mortgage index was 6.24 percent; four weeks ago, it was 6.17 percent.

The benchmark 15-year fixed-rate mortgage fell 31 basis points, to 5.45 percent. The benchmark 5/1 adjustable-rate mortgage fell 33 basis points, to 5.81 percent. The benchmark 30-year, fixed-rate jumbo mortgage, for home loans greater than $417,000, fell 17 basis points, to 7.03 percent.

The 30-year fixed hasn't been this low since Sept. 21, 2005, when it was 5.88 percent. You have to go all the way back to June of 2000 to find the last time the rate on the 30-year fixed tumbled more in one week. In the second week of that month, the 30-year fixed fell from 8.56 percent to 8.28 percent in one week.

This week's drop in rates can be traced to the release of the employment report for December. According to the Labor Department, the economy produced a net new 18,000 jobs in December. That was a lot worse than expected. Local, state and federal governments added 31,000 jobs, meaning that private employment actually shrank during the height of the holiday shopping season.

The unemployment rate climbed to 5 percent from the previous month's 4.7 percent. At 5 percent, the unemployment rate was higher than the average rate in the last 10 years (4.9 percent). Over that 10-year period, the unemployment rate was below 4.7 percent half the time. Five percent isn't horrible, but it's not benign, either.

Rates lower, hoops

to qualify higher

The prospect of a slowing economy sent mortgage rates lower. Normally, you would think that the lowest mortgage rates since September 2005 would goad people into mortgage offices to refinance their loans. Some of that is happening, but not in big numbers. The Mortgage Bankers Association says applications were up slightly last week, but it's difficult to make comparisons this time of year because of shortened holiday weeks.

Anecdotally, loan officers and brokers say business is down not only because of slow home sales, but because borrowers aren't paying attention to rates, or they don't think they'll qualify.

"Sixty percent of people who got mortgages last year can't get them this year," says Bob Moulton, president of Americana Mortgage Group of Melville, N.Y.

Moulton cites the example of a potential borrower who walked into his office early this week. She owed $700,000 on a house in Cape Coral, Fla., that had been appraised recently at $500,000. She couldn't afford to sell it, couldn't afford to refinance it, and couldn't afford the payments after a rate adjustment. Moulton says he recommended that she talk to a lawyer about negotiating a short sale, in which she would sell the house for less than the loan balance and the lender would forgive the shortfall.

Tread carefully

Loan officers and mortgage brokers say they're plagued by lenders that change the rules after a mortgage has been approved but before it has been funded. Some borrowers are getting all the way to the closing table before they find out that the loan approval has been withdrawn, or they have more paperwork to submit or more financial hoops to jump through.

"Even if they go through contract, they might not be able to get financing," Moulton says. Now he tells customers: "Make sure you have your house sold before you buy this house. Make sure it's priced right. You've got to be really conservative right now. You don't want to be caught with two houses" and two mortgage payments.

As the mortgage industry imploded last year, thousands of loan officers and brokers lost their jobs. They're not around to tell their customers that rates have dropped so low.

"It's a shame, because there are lots of people in the country who could refi, but their loan officers are no longer in the business," says Dan Green, a Cincinnati-based mortgage planner for Mobium Mortgage. "We call them orphan mortgages. They've just been left out."

'If you like it, lock it'

For people who want to refinance this year, now might be the best time to act, because lenders are likely to keep raising fees and tightening lending guidelines. Someone who qualifies for a mortgage now might not qualify a few months from now. When loan officers and mortgage brokers make this point, many of their customers brush it off as a hard sell. Doing so could be a mistake. Mortgage lending standards are indeed getting stricter by the week, and rates are low.

Moulton describes how he recently quoted a customer a rate of 5.875 percent on a 30-year fixed. "The guy said, 'Do you think they'll go lower?'" Moulton chuckles in rueful wonder. "I said, 'If you like it, lock it.'"

It was good advice. Not only might that rate be fleeting, but there's no guarantee that loan approval will be forthcoming a few weeks or months from now.