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NEW YORK (AP) — Mortgage applications rose 2.7 percent last week as more borrowers took advantage of the lowest rates in decades to reduce their monthly loan payments.

The Mortgage Bankers Association said Wednesday the increase was led by a 2.8 percent rise in refinance applications. The number of loans taken out to purchase a home rose 1.8 percent.

The numbers are adjusted for seasonal factors.

Refinancing is at its highest level since May 2009 and makes up almost 83 percent of all new loans, its highest share since January 2009.

However, home sales continue to struggle. Buyers are sitting out because they are worried about jobs or are deterred by strict mortgage requirements. Purchase activity is 40 percent below the levels seen at the end of April, when two federal tax credits for homebuyers expired.

Rates have fallen since spring as investors, worried about the health of the global economy, seek the safety of Treasury bonds. That lowered their yield, and mortgage rates tend to track those yields.

The average rate for a 30-year fixed loan fell to 4.43 percent from 4.55 percent a week earlier. Rates on the 15-year fixed-rate mortgage, a common refinancing option, decreased to 3.88 percent from 3.91 percent.

The Mortgage Bankers Association's survey covers more than 50 percent of all applications nationwide.
   
Copyright 2010 The Associated Press.