Applications for new mortgages jumped 9.3% for the week ending September 23, a sign that ultra low rates are finally spurring new business activity.

According to an index created by the Mortgage Bankers Association, refinancings continued to dominate the residential landscape, accounting for 79.7% of all applications, compared to a reading of 78.3% a week earlier.

The trade group said the refi share was the highest it's been since January of this year.

Lenders are still waiting for more renters to become homeowners, but for now will live off the refi wave for as long as they can.

Mike Fratantoni, MBA's vice president of research and economics, noted that purchase applications also rose but only for conventional loans. “Purchase applications for government loans fell by 0.6 percent over the week, likely influenced by the pending decline in FHA loan limits,” he said.

In a few days – unless Congress acts – the Fannie Mae/Freddie Mac loan limit will decline to $625,500 from $729,750, a change that also affects FHA mortgages.

Borrowers continue to opt for fixed rate loans with ARMs accounting for just 6.1% of activity, down from 6.7% the weak prior.

MBA reported that the average size of a loan originated in August was $212,700 in August 2011, compared to $211,200 in July 2011.

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