- Associated Press - Wednesday, August 18, 2010

WASHINGTON (AP) — Mortgage applications rose 13 percent last week as consumers refinanced at the lowest rates in decades.

The increase was driven by a 17 percent surge in applications to refinance home loans, the Mortgage Bankers Association said Wednesday. Those taken out to purchase homes fell by more than 3 percent. The numbers are adjusted for seasonal factors.

Home refinancing hit the highest level since May 2009 but still was lower than the last big boom during the first three months of that year.

Applications to refinance loans made up more than 81 percent of all home loan activity, the highest share since January 2009. Low mortgage rates have failed to spark home sales, which remain hobbled by the weak economy and tight credit standards.

Rates have fallen since spring as investors sought the safety of Treasury bonds, lowering their yield. Mortgage rates tend to track those yields.

The average rate for a 30-year fixed loan rose slightly to 4.6 percent from 4.57 percent a week earlier. The Mortgage Bankers Association’s survey covers more than 50 percent of all applications nationwide.