U.S. mortgage applications surged for the week ended January 9, the first full week of 2009. This was caused by the record low interest rates which increased the demand for home refinancing loans in more than 5-1/2 years. This was according to Mortgage Bankers Association as they track mortgage applications which includes both purchase and refinance loans.

The association’s seasonally adjusted mortgage application index for the week increase 15.8% to 1,324.8. This is the highest reading since the week ended July 11, 2003, when it reached 1,358.2.

The highest the index reached last year was 1,086 during the week ended February 2. The index was at its peak during the week ended May 30, 2003 at 1,856.7. This year was the height of the housing boom.  

An index value of 100 is equal to the application volume on March 16, 1990, the first week the MBA tracked application volume. The survey provides a picture of mortgage lending activity involving mortgage bankers, commercial banks and thrifts. It covers about 50 percent of all residential retail mortgage originations each week.

The refinance share of applications increased to 85.3% from 79.8% the previous week, the highest level since the MBA started conducting its survey in 1990.

The MBA’s seasonally adjusted index of refinancing applications jumped 25.6% to 7,414.1, the highest reading since the week ended June 27, 2003, when it reached 8,599.1.

The MBA's seasonally adjusted purchase index fell 14.1% to 295.8. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 10.8%.

The average rate for traditional, 30-year fixed-rate mortgages fell to 4.89 percent down 0.18 percentage point from the previous week. This is the lowest level in the MBA’s history. 

The average rate for 15-year fixed-rate mortgages dropped to 4.63 percent from 4.67 percent the previous week.

Rates for one year adjustable rate mortgage fell to 5.89 from 5.90 the previous week.