Mortgage applications up

NEW YORK (Reuters) - The lowest 30-year mortgage rates since late May boosted demand for mortgage applications last week, particularly by homeowners looking to refinance existing loans, according to data published by an industry group on Wednesday.

Average 30-year loan rates sank 0.33 percentage point to 6.06 percent in the week ending September 5, spurring a more than 15 percent jump in refinance applications, the Mortgage Bankers Association said.

The slide in rates came prior to Sunday's government takeover of Fannie Mae (FNM.N) and Freddie Mac (FRE.N) ,the two largest U.S. home funding companies, aimed at staunching global markets turmoil and stabilizing the worst housing market since the Great Depression.

Home loan rates sank as much as a half percentage point the day after the bailout of the two struggling companies.

The MBA's seasonally adjusted index of total mortgage application activity rose 9.5 percent last week to 496.2, the highest level since mid-July.

The seasonally adjusted index of refinancing applications gained by 15.4 percent to 1,222.9 and the measure of home purchase loan requests rose 6.4 percent to 371.5.

The past week's results include an adjustment for the Labor Day holiday, which shut U.S. financial markets.

If the current 30-year fixed rate of about 6 percent holds, almost one third of the mortgage universe has a 1/2 percentage point or more incentive to refinance, according to JPMorgan.

"We would look for the refinancing index to more than double, moving into the 2,000 to 2,500 area," the firm's analysts said on Monday.

An additional half-point cut in the mortgage rate "will make 60 percent of the universe refinanceable by 50 basis points or more," JPMorgan said. "The last time this happened was in late January 2008 when the refinancing index printed above 5,000."

Falling mortgage rates and discounted prices could help burn off some of the enormous overhang of unsold homes, enticing purchasers back to the market. Until the excess of supply is cleared, U.S. housing will wrestle with finding a floor, analysts contend.

(Reporting by Lynn Adler; Editing by Leslie Adler)