This one is hard to miss: Huge numbers of loans are being refinanced with larger mortgages. In the first quarter of 2006, Freddie Mac says that 88 percent of its loans that were refinanced were replaced with loans that were at least 5 percent larger. This is the highest rate of equity withdrawal in the past 15 years.

There are two mysteries here: First, in a mortgage environment with rising rates why would borrowers want to refinance? Second, why are loans bigger when real estate appreciation has slowed in many markets?

Since the summer of 2003 mortgage rates have climbed from roughly 5.2 percent to 6.6 percent. If you borrowed $300,000 at 5.2 percent your monthly cost for principal and interest would be $1,647 over 30 years. At 6.6 percent, the monthly cost would be $1,916.

For recent fixed-rate borrowers refinancing to just get a higher monthly cost makes no sense. There has to be something else at work here -- and there is. It is those without fixed-rates who are refinancing in big numbers.

The Federal Reserve says that "roughly 85 percent of first mortgages were fixed-rate in 2001, slightly more than 10 percent were adjustable-rate, and the rest were balloon."

But now the numbers are different. Figures from the Mortgage Bankers Association show that in the first six months of 2005 -- the latest available figures -- only 40 percent of all loans by dollar volume were fixed-rate products.

In other words, 60 percent of all recent loans by dollar volume are adjustable or interest-only. More upsetting -- and more financially dangerous -- large numbers of these loans are high-risk, little down, high-balance products that feature or allow low monthly payments for the first several years of the loan term, payments that will surely increase after three, five or seven years.

This means if you were sucked into a loan with low up-front payments you knew there would come a time when monthly costs would rise even if mortgage rates remained steady.

Many borrowers, seeing what looms ahead, are refinancing. If they refinance with a fixed-rate loan they likely see higher-but-tolerable monthly payments today but they get the benefit of steady and known future payments. If they refinance with still-another high-risk toxic loan, they postpone, delay and defer that ultimate day of reckoning.

But why bigger loans?

Despite all the talk of a real estate bust, the fact is that existing home values rose nationwide more than 12.7 percent last year. This means that most individuals who have owned homes for several years -- but not all -- have more equity, even owners with toxic loans.

What most owners do not have is cash. Homes are increasingly bought with little or nothing down. As an example, figures from the National Association of Realtors show that in 1995 the typical first-time buyer -- about 40 percent of the market -- bought with a 92.8 percent loan-to-value mortgage. By 2004, 97 percent financing was the norm for first-timers.

You can refinance today with little or no cash to close. This is possible because lenders offset closing costs by increasing either the loan amount or the interest rate.

Given more equity, many borrowers have decided that the best way to pay for refinancing is with a bigger loan rather than a higher rate. That would readily account for the huge number of loans that are at least 5 percent larger.

Those who convert from high-risk loans to fixed-rate fixing, even at a higher monthly cost, are positioning themselves for a future where rates may be still-higher and appreciation may be lower. This may not be a joyful choice, but it's better than being foreclosed if monthly mortgage costs rise to intolerable levels.

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