The recent drop in long-term interest rates has given a new lease on life to the mortgage refinancing boom.

"Refinance mania is in full gear," said Steve Norman of Cal Coast Mortgage Corp., San Diego. "It had started to subside, but new applications are picking up."

As the yield on 30-year Treasury bonds fell in June from 6.92% to an all-time low of 6.66%, mortgage rates matched the decline almost point for point.

The average interest rate on a 30-year, fixed-rate home loan has fallen to 7.37%, down 23 basis points from the end of May, according to HSH Associates, Butler, N.J.

The drop, in turn, has added fuel to a refinancing boom that already is stretching well into its second year.

"There definitely has been a resurgence in refinances," said Richard Malloy, chief administration officer at Norwest Corp.'s mortgage unit.

An index of weekly refinancing applications rose about 10% from late May through mid-June, the latest reading.

The index, maintained by the Mortgage Bankers Association of America, stood at 819.3, having passed the 800 mark for the fourth time since early 1992.

The index, however, was still well below the 1993 peak of 1465.6 reached in mid-March. A reading of 100 correlates with application levels of March 1990.

The recent bounce in loan demand is eliciting outright glee from some lenders.

'It's Gravy'

"We really love it when it's like this," said Mr. Norman of Cal Coast. "It's gravy."

As with other lenders, the company's refinancing is up after a lull in early June, he said. Calls to Cal Coast's offices from consumers seeking refinancing are running 20% higher than in late May, Mr. Norman said.

Mr. Norman said his business is still booming, with total originations up 42% from this time last year.

Other lenders report similar results.

Bank of Mississippi in Tupelo "saw a lull" around June 1, said William G. Hardin, first vice president of the mortgage loan department. But since then, refinancing has "definitely picked up," he said.

"People are convinced that if they're going to do something, they'd better go ahead and do it now," Mr. Hardin added.

But mortgage lenders concede that the endless refinance boom has its downside, too. The industry is rife with stories of 20-hour workdays, weekend work, and backlogged county clerk's offices. One bank even went to the extreme length of turning away business.

"We've had to restrict refi activity to people we've funded before in order to keep our sanity," said Terry Snyder, senior vice president for residential lending at Centennial Bank in Olympia, Wash.

Added Mr. Hardin of Bank of Mississippi: "We're tired because we haven't had a letup in 24 months, but in this business you have to get it when it's there."

Cautious Confidence

David Lereah, chief economist at the Mortgage Bankers, takes a cautious approach to the shift. "I'm confident that things will pick up, but I'm not looking for us to take off to the races," he said.

Indeed, some lenders think a drop of at least 25 to 50 basis points in mortgage rates would be needed before refinances could spike up to the stratospheric levels of late 1992.

In the meantime, mortgage lenders around the country continue to be swamped with loan applications, and have little time to notice small changes in volume.

"When you're in a car going 100 miles per hour, it's hard to notice an increase in speed," said Jerold K. Hoerner, president of Metmor Financial Inc. in Overland Park, Kan.

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