Are mortgage rates done falling?

With 30-year fixed mortgage rates hovering right around at 5% for borrowers with excellent credit, The Wall Street Journalreports(subscription required) that "those hoping mortgage rates will fall sharply from current levels, already historically low, may be disappointed."

Lower mortgage rates have driven out competition as margins fall, and the jump in refinancing applications has many lenders backed up with more business than they have time to deal with.

Given that, there may be little incentive for lenders to continue to drive down mortgage rates. In addition, the warehouse lines of credit that small lenders use to make loans before selling them to Fannie and Freddie are extremely tight right now, limiting their ability to do business.

There may be a lot of good reasons to wait to buy a home: falling prices, personal reasons, a new wave of foreclosures that will hit the market as adjustable-rate mortgages continue to adjust upward and make payments unaffordable. But prospective buyers waiting for interest rates to fall further may find themselves disappointed.

And remember: If you buy now and interest rates fall further, you can refinance if it's enough of a difference to justify the additional cost. But if you wait to buy until interest rates spike up, that dream home may become unaffordable.