By Amy Hoak, MarketWatch

CHICAGO (MarketWatch) — Economists and bankers who follow mortgage rates religiously think that rates don’t have much farther to drop from record lows. They expect that rates can only go up.

But they also know they’ve been wrong before.

“It’s hard to imagine how long-term, 30-year fixed-rate mortgages could go lower than they are right now,” said Frank Nothaft, chief economist of Freddie Mac. “These are the cheapest rates we’ve ever seen.”

Admittedly, he would have said the same thing six months ago.

That’s because earlier this year, Nothaft and others weren’t expecting such a weak economy. Concerns about European markets have unsettled the market, too. And in September, the Federal Reserve announced its commitment to sell short-term government securities and buy long-term securities, a plan known as Operation Twist. The Fed also pledged to purchase mortgage-backed securities, with the proceeds of securities that mature.
Read more: Fed decides on $400 billion bond swap.

All of the above put downward pressure on mortgage rates.

And while mortgage rates move daily, those rates have been at or near record lows: Rates on the 30-year fixed-rate mortgage averaged 4.01% for the week ending Sept. 29, according to Freddie Mac. That’s the lowest rates have been in the survey’s history, which dates back to 1971.
Read more: 30-year mortgage rates just barely above 4%.

“My take on this is that certainly interest rates could push lower. We’ve been surprised numerous times,” said Bob Walters, chief economist of Quicken Loans, an online lender.

However, he says there’s more of a risk of a surprise increase in rates than a surprise decrease. That’s because the Fed’s actions are already priced into the market. And with the economy limping along, it’s hard to imagine things could get much worse.

Low mortgage rates are advantageous for buying a home or refinancing the home loan you already have. But, remember, the big reason they’re so low now is because the economy is in such bad shape — and most of us would likely pick job security over an ultra-low mortgage rate.

Still, some borrowers are charmed by the notion of getting a 30-year fixed-rate mortgage at a rate below 4%. In fact, some are paying points to buy down their rate “to say they had a loan below 4%,” said Stephen M. Calk, chief executive of Chicago Bancorp, a privately held retail mortgage bank.

While getting the lowest mortgage rate possible may give someone bragging rights, Calk advises against people being too greedy. Walters agrees: If you have a mortgage at 5% and you could refinance at 4.25%, waiting for the rate to fall an additional 25 basis points could cost you.

“The alternative is that if you don’t take 4.25%, you’re at 5% for the rest of your life,” Walters said.