Mortgage rates fell below 5% for the first time since mid-May last week, leading to increased appetite for refinancing, new loans, and purchases, an industry survey said Wednesday. The triple-front increases follow a soft performance in the holiday-shortened week before.

The Mortgage Bankers Association said the average mortgage rate fell to 4.97% in the week ending September 18. That, in combination with the $8,000 tax credit for first-time home purchasers expiring at the end of November, helped the mortgage loan application index expand by 12.8% in the week.

Even with the unemployment rate approaching double-digits, government incentives have helped the index improve by 14.0% compared to last year.

However, the main contributor to the week’s performance was from current homeowners. Refinances, which accounted for nearly 64% of all loans in the period, climbed 17.4% from the previous week, helping the 4-week average tick up to 6.8%.

Purchases also saw a significant 5.6% gain, with the boost coming from governmen-insured loan programs. “The share of purchase applications that were government-insured was 45.7%, the highest share since November 1990”, the report said.

Mortgage rates across the country remain low in part because the Federal Reserve has purchased $862 billion agency mortgage-backed securities since January 5, 2009. With new and existing home purchases stabilizing, it is unclear if the Fed needs to continue the initiative, so when the central bank concludes its two-day monetary policy meeting this afternoon, traders will be looking for comments related to the matter.

Yesterday, a report from showed the state average is below 5.20% in all 50 states. Lenders in Texas offer the lowest rates with an average of 4.96%, while rates in Wisconsin are currently the highest at 5.16%.