Homeowners rush to refinance

After weeks of mortgage rates hovering near record lows, mortgage refinancing saw a marked upturn - just as rates moved higher.

Figures from the Mortgage Bankers Association reveal that the volume of mortgage applications rose by 8.6 percent during the final week of January. Approximately 73 percent of these consisted of refinancing applications.

Meanwhile, the average cost of a 30-year fixed-rate mortgage was 5.28 percent, an increase of 0.06 percent on the previous week. Rates stood at 4.89 percent just three weeks ago.

Still, mortgage rates remain lower than they were at the same time last year, which may be spurring existing homeowners into refinancing.

But new homebuyers are still few and far between, perhaps due to economic uncertainty.

"It's a matter of confidence in the market," Mortgage Master CEO Leif Thomsen told Reuters. "People are insecure about their jobs, so they aren't buying big-ticket items."

The government is currently exploring various ways of supporting the ailing housing sector and helping ease buyers into the market.

One measure suggested by Republican lawmakers involves an incentive for lenders to offer 30-year-fixed-rate home loans at an interest rate of 4 percent.

A new homebuyer tax credit is already included in President Obama's economic stimulus package, but a proposed amendment would double the amount to $15,000 and open it up to all buyers.

Those who are looking to take advantage of current mortgage rates and refinance will be expected to have better credit scores and larger down payments than in times past.

Recent data has shown that financial institutions are continuing to tighten their credit standards, which may make it more difficult to obtain a home loan