FT reports US banks are having trouble handling a surge of mortgage applications spurred by dramatically lower interest rates, after record loan defaults and thousands of job cuts have stretched mortgage industry resources to the limit. Applications for home loans more than doubled in the two weeks after the Federal Reserve said it would buy mortgage bonds to help stabilise the market, prompting mortgage rates to fall by more than three-quarters of a percentage point. With average rates for a 30-year, fixed-rate mortgage now at about 5.2%, growing numbers of borrowers have an incentive to refinance to bring down their mortgage costs. But tighter underwriting standards for prospective borrowers, combined with funding and staffing difficulties for mortgage originators, are likely to restrict the supply of new mortgages. "The mortgage industry is collectively unprepared to deal with a cascade of business; staffs were pared to the bone as the market for mortgages shrank over the past year," analysts at HSH Associates wrote in a note to clients.