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NEW YORK - Homeowners rushed to take advantage of last week's drop in interest rates after the government's takeover of lending giants Fannie Mae and Freddie Mac, but rates are rising again on investor fears about eroding conditions in financial markets.

A mini-refinance boom started Thursday but ended early Monday, said Pava Leyrer, president of Heritage National Mortgage in Michigan. The average rate on a 30-year, fixed-rate mortgage was 6.14 percent Wednesday, up from 6.02 percent last week after the government took over Fannie and Freddie, although still below last month's 6.65 percent, according to HSH Associates.

"We've had three rate changes in an afternoon, and not for the good, either," Leyrer said Wednesday.

She said investors aren't happy with the Federal Reserve's decision Tuesday not to cut a key interest rate in the face of recent market chaos. The central bank kept the federal funds rate at 2 percent, even after the demise of Lehman Brothers, the forced sale of Merrill Lynch and steep declines in the stock markets.

Last week, applications by homeowners looking to refinance their mortgages spiked 88 percent, according to the Mortgage Bankers Association. Refinances accounted for nearly 52 percent of all applications, up from 36 percent the previous week, the trade group said.

But while the number of applications soared, approval rates will likely be low, because appraisals for many homes are coming in close to or below the amount of the existing mortgages.

The volume of purchase applications also edged up last week by 5 percent.

Nationwide, home prices dropped a record 15.4 percent in the second quarter, according to Standard & Poor's/Case-Shiller's U.S. National Home Price Index. In many once-hot markets such as Las Vegas, Los Angeles and Miami, prices have fallen 25 percent or more, making it nearly impossible to refinance into a more manageable home loan.