NEW YORK (CNNMoney) -- A 4% mortgage sounds too good to be true -- and for more than 90% of borrowers, it is.
The average rate for a 30-year mortgage dropped below 4% earlier this month for the first time, hitting 3.94%, Freddie Mac reported.
But at the same time, LendingTree (TREE) reported that the average rate offered to borrowers by its network of lenders was about 4.32%.
Only about 9% of LendingTree borrowers got loans below 4%. About a third got loans between 4.5% and 5%.
Those rates are still low, but a half point rate difference adds about $700 a year to the payments on a $200,000 mortgage.
There are a couple of reasons why so few borrowers get the best deals. One is that Freddie Mac surveys lenders, and the rates they quote apply to borrowers with flawless credit, ones with high credit scores and who put down 20% or more. The LendingTree numbers reflect actual loans that borrowers got.
There's another factor in play, too. The low rates draw in a flood of current homeowners looking to refi. Nearly 80% of all mortgage applications lately have been to refinance existing loans. The rush of applicants can drive up rates.
"Lenders quickly become flooded with volume and can adjust rates to slow their pipelines," said Doug Lebda, CEO of LendingTree.
The industry can handle less volume than in the past. After the housing bust, many lenders closed their doors and large numbers of loan officers and other workers left the industry. Many lenders are understaffed and can be easily overwhelmed with applicants.
When that happens, according to David Adamo, CEO of Luxury Mortgage, the banks discourage borrowers."They expand their margins and that sends rates up," he said. 
| Overnight Avg Rate | Latest | Change | Last Week |
|---|---|---|---|
| 30 yr fixed | 3.80% | 3.88% | |
| 15 yr fixed | 3.20% | 3.23% | |
| 5/1 ARM | 3.84% | 3.88% | |
| 30 yr refi | 3.82% | 3.93% | |
| 15 yr refi | 3.20% | 3.23% |
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