Fixed 30-year mortgage rates averaged 5.50 percent last week, excluding fees, up 2 basis points from 5.48 percent the previous week. However, mortgage rates remain historically low, encouraging USconsumers to refinance existing home loans.
"Rates are now piercing through levels where many Americans can benefit from refinancing," said Bob Walters, chief economist at Quicken Loans, the nation's largest online mortgage lender and one of the 20 largest retail mortgage lenders in the US, according to National Mortgage News.
The MBA's seasonally adjusted index of refinancing applications climbed 4.1 percent to 2,530.1, adding to the 7.8 percent gain the prior week and marking the fourth gain in the past five weeks.
That is also the highest level for refinancings since the week ended April 16, 2004 when the index reached 2,550.3.
Refinancings made up 49.9 percent of all mortgage applications last week, up from 48.9 percent the previous week.
"Conventional wisdom had rates rising and refinance activity falling. But conventional wisdom had it wrong and it now appears we may be on the cusp of yet another refinance boom," Walters said.
"The larger question, of course, is how long these historically low rates will stick around," Quicken's Walters said. "The answer might be somewhere in the Fed's semi annual report to Congress...if rates start to rise, mortgage application volume will likely be affected.
Federal Reserve Chairman Alan Greenspan is scheduled to testify before Congress on the state of the US economy Wednesday and Thursday.
While low fixed rates buoyed the recent increase in refinancing activity, they were not enough to spur stronger buying.
The MBA's purchase index, a gauge of loan requests for home purchases, declined 4.8 percent to 423.3, after rising 1.0 percent the previous week.
"The tide has turned for purchase demand, with the underlying trend for home buying softening," Celia Chen, director of housing economics at Economy.com, an economic consulting firm, said in a commentary Wednesday.