Mortgage rates on 30-year fixed-rate loans have reached a record low of 4.27% on average. However, analysts and other industry insiders say home-loan rates haven't dropped further because lenders do not want to lose their profit margins. Banks might have dropped the rate lower during "normal times" but "illiquidity and unusual situations are causing originators to hold rates at this level rather than risk losing money on new loans they have difficulty hedging," said Paul Jacob, director of research at Banc of Manhattan Capital in California.

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