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Rate dip lifts refinancing demand

NEW YORK (Reuters) - The number of applications Americans filed for mortgage loans jumped last week on a sharp rebound in refinancing requests after having fallen for nine straight weeks, according to an industry survey.

The seasonally adjusted gauge for loan applications to refinance increased 45.5 percent, to 2,883.6, from the previous week's 1,981.5, the Mortgage Bankers Association of America reported Wednesday.

The bounce in refinancing demand marked the biggest increase since January 2001.

Demand for refinancing has fallen sharply in recent weeks prompted by the upward spike in mortgage rates. But rates slid on Friday along with Treasury yields following a poor U.S. payrolls report that showed a surprise decline in jobs in August, crimping optimism the job market would finally recover.

Friday's drop in Treasury yields pushed average 30-year mortgage rates below 6 percent for the first time since mid-July.

The index of demand for loans for home purchases rose to 408.8, up 3.2 percent from the prior week's 396.1. Demand for loans to buy homes has dropped only slightly in recent months, supported by strong home sales.

The group said its seasonally adjusted gauge of overall mortgage requests rose to 771.8 for the week ended Sept. 5, up 22.8 percent from the previous week's 628.7.

The reading is the highest in four weeks but still well below the record high of 1,856.7 in the last week of May.

It is unclear whether last week's rise in refinancing applications to their highest level in a month was a trend reversal or the last gasp of the unprecedented boom.

Wall Street investment bank Goldman Sachs warned of weaker consumer spending that could hurt retailers like Home Depot Inc. and Federated Department Stores in the belief that the housing turnover is peaking and may decelerate later this year.

Chief executives at Washington Mutual Inc. and Countrywide Financial Corp., the No. 2 and No. 3 U.S. mortgage lenders, said at a financial conference in New York Tuesday that they saw double-digit declines in mortgage applications in August versus July.

Economists and the Federal Reserve have acknowledged the key role of refinancing in supporting the economy when it turned sour three years ago. Refinancing, spurred by low interest rates, freed up billions of dollars in cash for consumers to spend.

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