Mortgage Rates Hit Record Lows, Refinancing Applications Jump

The Fed's moves have dragged rates down to 4.63 percent.

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Ben Bernanke's aggressive moves to engineer lower mortgage rates are working--sort of.

After the Fed announced last week plans to buy additional Fannie Mae and Freddie Mac mortgage-backed securities and even long-term Treasury bonds, mortgage rates responded accordingly. For the week ending March 20, 30-year fixed-rate mortgages dropped to 4.63 percent, according to the Mortgage Bankers Association--that's the lowest rate in the history its survey (data goes back to 1990).

[Check out Mortgage Rates to Fall Further: 7 Things to Know]

The lower rates have triggered a sharp rise in mortgage applications. The MBA's index measuring application volume jumped by almost a third from the previous week. But the increase was driven almost entirely by refinancing applications. The refinancing index surged nearly 42 percent, while the purchase index inched just 4 percent higher. Overall, refinancing now represents nearly 79 percent of all applications, according to the MBA.

[See Low Mortgage Rates: 7 Things You Need to Know to Refinance]

So while its great news for homeowners who can qualify to refinance an existing mortgage, the data suggests that the Fed's moves have not--at least so far--triggered the kind of home buying demanded needed to expedite a housing recovery. Mike Larson of Weiss Research has more in a report of his own:

The latest figures underscore the point I've made on many occasions: Refinancing when rates plunge is a no brainer, provided you're going to be in the property long enough to recoup your upfront costs. But a lot more than financing costs goes into the decision to buy a house. If people aren't confident in the future direction of home prices, or they're worried about their jobs, low interest may not be enough to get them off the fence. We will likely continue to see relatively muted activity in the housing market, and only a gradual recovery with time, despite the lowest mortgage rates in modern history.

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