U.S. mortgage applications rose for a second consecutive week, reflecting a jump in demand for home loan refinancing even as interest rates surged, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Oct. 10 increased 5.1 percent to 489.3.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.47 percent, up 0.48 percentage point from the previous week.

Interest rates were above year-ago levels of 6.40 percent.

"Treasury yields were extremely volatile last week. The yield on the 10-year Treasury note -- the benchmark for 30-year fixed mortgage rate -- moved up about 40 basis points over the course of the week," Orawin Velz, the MBA's associate vice president of economic forecasting, said in a statement.

"Lower yields earlier in the week appeared to have spurred refinance activity, which then faded as the week went on and rates began to rise." she said.

The MBA's seasonally adjusted purchase index fell 0.3 percent to 313.5.

The index came in well below its year-ago level of 429.1, a drop of 26.9 percent.

Overall mortgage applications last week were 25.4 percent below their year-ago level.

The four-week moving average of mortgage applications, which smoothes the volatile weekly figures, was down 7.9 percent.

Weekly Refinancing Activity Jumps

The group's seasonally adjusted index of refinancing applications jumped 12.5 percent to 1,514.2.

The index was down 23.6 percent from its year-ago level of 1,980.9.

The refinance share of applications increased to 46.4 percent from 43.4 percent the previous week.

The adjustable-rate mortgage (ARM) share of activity increased to 2.6 percent, up from 2.3 percent the previous week.

Fixed 15-year mortgage rates averaged 6.17 percent, up from 5.71 percent the previous week.

Rates on one-year ARMs increased to 6.67 percent from 6.60 percent.

The MBA's report precedes separate data this week gauging the U.S. housing market, currently suffering the worst downturn since the Great Depression.

The National Association of Home Builders on Thursday will release its October NAHB/Wells Fargo Housing Market Index.

The Commerce Department on Friday will release September data on U.S. housing starts.

While U.S. housing market indexes tend to be volatile, data from the MBA may help gauge how the hard-hit sector is faring.

My wife I and refinanced our mortgage from 8.5 to 7% but our payments are staying about the same cause e added some student loans and a couple other loanss into the mortgage. 

Could be some real good buys so this dosnt surprise me

 This is a great way to consoladate your loans and a great savings...good for you !!

Banks should do everything in their power to refinance borrowers to keep foreclosures down.

 Yeah but I think they are wrong for raising the interest rates. Trying to get more out of us in the long run. Wrong

I was thinking that maybe if the government gave everyone a percentage of the $700 billion to straighten out their bills and mortgages possibly the country would be in a much better position. It is our money! But, what am I thinking?  It will never happen because that would make too much sense.  It would help the people in foreclosure keep their homes and we wouldn't have homeless people to worry about.  I googled the depression of 1929 and it turns out there was another depression in the 1800's that was worse than the one in 1929.  I didn't know about that one and many people lost their homes back then too. There was very little food and it was global just like the one now.  It's funny that we don't hear about the depression from the 1800's I wonder why that is?  We could sure learn some lessons from what the people went through then. 

Good info ! We have a 15 yr mortgage, The only way it would work for us it to extend to a 30yr note.

Only 2yrs left till we burn the mortgage . YEA !!

Sam, that's awesome!  I liked the 15 yr mortgage deals and I'm glad you have one.  Especially now when things are so bad.

 I too prefer the 15 year mortage, for those who can swing it finacially it is the way to go.

I agree with the 15 year mortgage, the payment is not that much more but the amount you save in intrest is unbelievable.

I thought interest rates were supposed to be going down? What happened?

 No one knows for sure what is going to happen to the interest rates....I would think in order to help the economy and get people back on track with their finances the rates should hold...but you never know...and that is why I fear the variable loans, as tempting as they are, I need stability and need to know exactly how much I will be paying each month and can I afford that amount.

When I purchased my first house I wish I had known then what I know now.  I would have jumped on a 15 year loan if I would have known better...but alas, I did not.  What's worse is I bought this house at the top of the bubble. damn.

Reznor, I don't think you are alone.  There are a lot of people right where you are now.  I have a friend that did the same thing as you but he's so happy with the house that he's still glad he bought when he did.  I think the month after he bought the house the bottom fell out of the market.  Just unbelievable!