Mortgage loan applications have increased 23% this last week due to record low rates.
Orlando, FL (MBNews.org) -- Historic record low have encouraged many homeowners to refinance according to the Mortgage Bankers Association.
We have seen refinancing activity climbed 26.4% just this week week ending January 13, to its highest level since early August, the MBA reported. Meanwhile applications for new mortgages climbed 10.3% week-over-week.
The heightened activity comes as mortgage rates test new bottoms. Last week, rates on both the 30-year and 15-year fixed loans fell to new records, at 3.89% and 3.16%, respectively, according to Freddie Mac.
The vast majority of the applications -- 82.2% -- were to refinance existing loans rather than purchase new ones, the MBA said.
The fact that purchase applications significantly lagged those for refinancings underscored a truism about low mortgage rates, said Doug Duncan, chief economist for Fannie Mae (FNMA, Fortune 500). "[Home] sales are a lot less interest-rate sensitive than people think
A near-miss for ARM holders
Low rates have had a positive impact on the housing market in at least two important ways, said Keith Gumbinger of HSH Associates. First, there are those borrowers who were able to avoid foreclosure by refinancing and lowering their monthly payments.

Then there are the tens of thousands of homeowners with risky adjustable-rate mortgages who have avoided potential disaster. These borrowers could have been hit hard had rates been higher when their loans reset. But instead, they are saving money, he said.
Adjustable-rate mortgages reset under a formula that involves a margin, specified in the contract, and an index, usually the one-year London Inter-Bank Offerer Rate (LIBOR). Margins on option ARMs range between 1.625% and 2.5%, and the current LIBOR rate is arou