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Many borrowers still hold loans carrying higher interest rates. The average rate on mortgages in the second quarter was 5.28%, Nothaft said.

By refinancing to a 30-year fixed loan at today’s average rate, he said, homeowners could save about $1,715 a year on a $200,000 loan.

To get the current rate on the 30-year fixed mortgage, borrowers had to pay an average of 0.7 points. An average 0.6 points paid was required for the rate on a 15-year fixed mortgage and for both of this week’s ARM rates.

A point is 1% of the mortgage amount, charged as prepaid interest.

Interest rates could bump along at these low levels for a while, Gumbinger said.

“The big drivers of interest rates are fully back in play, and that’s the economy and concerns about inflation,” he said.

“We don’t really have much economy going on right now and we have level inflation,” he said, noting that there was an uptick in prices earlier this year but that they seem to be fairly stable now. Read more: U.S. consumer prices rose 0.4% in August.

“Prices are pretty firm at the moment, so there’s not a fear at this moment of increasing inflation,” Gumbinger said.

Plus, he said, there's speculation “that we might see some [price declines] as we move forward. So, inflation is level, economic growth is poor and that should keep rates level to slightly declining as long as that persists.”

http://www.marketwatch.com/m