updated 11/15/2006 9:04:09 AM ET 2006-11-15T14:04:09

Applications for U.S. home mortgages rose last week to their highest level since January as falling interest rates encouraged more loan refinancings, data from an industry group showed Wednesday.

The seasonally-adjusted index of total mortgage applications increased 4.3 percent in the week ended Nov. 10 to 647.5, according to the Mortgage Bankers Association. The four-week moving average for the applications index hit 606.8, up 2.6 percent on the week.

Residential mortgage refinancing surged to its fastest rate since October 2005, the MBA said. Refinancing accounted for 48 percent of all applications, the most since February 2005.

Much of the refinancing at Countrywide Financial Corp., the largest U.S. mortgage lender, has been homeowners exiting adjustable loans taken out when interest rates were lower, said Angelo Mozilo, the company's chief executive officer.

"Borrowers are proactively refinancing in advance of rate resets," he said at a Merrill Lynch & Co. investor conference in New York on Tuesday. "There's a high level of consumer awareness and astuteness."

At least $1.1 trillion in adjustable-rate loans are due to reset in 2007 unless they are refinanced, according to MBA research. Many of the loans are indexed to short-term rates tied to the Federal Reserve's federal funds target, which has climbed to 5.25 percent from 1 percent in early 2004.

The MBA's gauge of loan refinancing jumped 6.5 percent to 2,022.2, the group said, adding that its index of home purchases increased 2.7 percent to a four-month high of 412.9.

Long-term, 30-year fixed-rate mortgage rates dropped 9 basis points to 6.15 percent, the lowest since January, the MBA said. The average rate on a mortgage whose rate adjusts each year declined to 5.87 percent from 5.89 percent.

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Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 3.79%
$30K home equity loan FICO 4.99%
$75K home equity loan FICO 4.69%
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Low Interest Cards 13.83%
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Source: Bankrate.com