With 30-year home adjustable mortgage rate quotes dipping for the first time below 4 percent - that's right, under 4 percent - lenders report a surge of activity in that market segment that had been moribund.

Home buyers and refinancers are snapping up mortgages in the low 4 percent range and even below, according to new data compiled by the country's largest mortgage monitoring service.Adjustables accounted for barely 5 percent of national mortgage volume earlier this summer, said Paul Havemann, vice president of HSH Associates of Butler, N.J. But in late August they jumped to between 20 percent and 25 percent of volume for many lenders. Havemann's firm monitors rate movements at over 2,000 banks and mortgage companies nationwide.

There's no secret to the force behind the surge: Lenders now have priced adjustable so aggressively that in some cases the starting rates on the loans are a full 4 percentage points below competing fixed-rate, 30-year mortgages.

"If you're a first-time buyer, or you're refinancing and you know you're only going to stay in the house for a few years, it makes financial sense to go for the lowest payment-rate loan around," said Havemann. "And right now, that's a one-year adjustable."

Though major lenders began pushing rate quotes on adjustable rate mortgages into the mid-4 percent range weeks ago, the 4 percent barrier wasn't cracked until late August. Arbor National Mortgage Corp., a New York-based mortgage banker active on the East Coast, cut its rate to 3.95 percent, with 3 points at closing. (A point equals one percent of the mortgage amount.)

Nationwide, more than 20 lenders dropped to 4.25 percent or below in late August, according to HSH. Several major firms quoted a flat 4.0 percent, with varying points and fees.

They hadn't hit that low in Chicago, but rate tracker Gary S. Meyers & Associates found 21 ARMs with first-year rates of 5 percent or less, including offerings from La Salle Talman, First Nationwide and Citicorp.

Virtually all these mortgages come with standard rate caps of 2 percent and 6 percent. The 2 percent cap is the maximum year-to-year allowable rate charge, up or down. The 6 percent cap is the highest rate that could ever be charged on the loan throughout its 30-year term.

That means, for instance, that no matter what happens to interest rates in the economy, the highest rate on a 3.95 percent adjustable in the second year would be 5.95 percent. The highest permitted rate in the third year would be 7.95 percent. And the worst-case rate scenario would be 9.95 percent in the fourth year or beyond.

If rates in the economy remained generally moderate, the upper limits of the caps would never come into play. Borrowers could remain in the 6 to 7 percent range indefinitely.

They would also have the right to convert the loan into a fixed-rate mortgage for a $ 250 fee at the third, fourth or fifth adjustment.

The out-of-pocket savings on a 3.95 percent ARM could be compelling for certain buyers or refinancers. First-year monthly principal and interest payments on a $ 100,000 loan would come to $ 475. The same $ 100,000 mortgage at a 7.5 percent fixed rate would require monthly payments of $ 699.