With home-loan interest rates at a 50-year low, mortgage market analysts were expecting an avalanche of loan originations for refinancing and purchases of homes and condos this year.

But the Great Recession and subprime credit crisis have left us with anything but normal conditions today. Mortgage origination forecasts are well below half of what occurred in 2003.

Mortgage rates have moved significantly lower during the summer of 2010, with lenders quoting 4.5 percent or less on benchmark 30-year fixed loans and less than 4 percent on 15-year fixed-rate mortgages, reports Freddie Mac.

These are the lowest conventional fixed-rates available in the market in more than five decades. Although Freddie Mac didn’t start keeping track of conventional 30-year mortgage rates until 1971, historians note that from 1949-1953, FHA-insured mortgages had contract rates below 4.5 percent, and conventional rates were likely close to these.

“Under normal circumstances, such low rates would support home purchases and generate substantial refinance activity,” observed Frank Nothaft, Freddie Mac vice president and chief economist.

For example, in 2003, when mortgage rates hit the then-record low of 5.21 percent, nearly $4 trillion in new mortgages were originated, and the refinance share was 70 percent or roughly $2.7 trillion.

The current refinance share has risen to above 70 percent, indicating that borrowers are responding to low mortgage rates. But where are all the “missing” loan originations?

One answer is “in cash.” According to the National Association of Realtors, about one-quarter of existing home sales are all-cash transactions in 2010, compared with about 5 to 10 percent several years ago. Similarly, a high share of borrowers in the past few quarters have paid cash in during refinance.

According to Freddie Mac’s Quarterly Refinance Report, more than 20 percent of refinancing homeowners paid down their principal balance when they refinanced in the first half of this year—in contrast, less than 15 percent did so in 2003.

Cash-in refinance may occur because of low yields on other financial investments or the need or desire to reduce loan-to-value in order to obtain the lowest-cost loan.

A second reason why originations are lower than one might otherwise expect in such a low interest-rate environment is that home-value declines have eroded equity so much in some neighborhoods that the borrower no longer qualifies for a low-loan-to-value refinance, and they either lack the cash reserves needed to get back to a qualifying down payment position or they avoid putting in more cash in the event prices fall further.

Another reason loan originations are running at low levels is because home sales volumes are low — our forecast is for fewer than 5 million new and existing detached single-family home sales in 2010, or 25 percent less than the volume of sales in 2003.

“Looking ahead, fixed-rate mortgage rates may edge down further, though we think it unlikely that they would fall far from where they are today,” Nothaft said. “But it is also unlikely that they will rise quickly, especially given the low yields on the 10-year Treasury note, the benign inflation environment (importantly, low expectations of future inflation), and the still-weak employment picture.”

Whether on-the-fence home buyers and potential refinancers will soon take advantage of the historic opportunities presented by the lowest mortgage rates in five decades remains to be seen, but we’re not counting on a change anytime soon.