The week shortened by the Thanksgiving holiday saw mortgage application volume drop 16.5% from the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association. However, the seasonally adjusted estimate for purchase-only mortgages increased.

On an unadjusted basis, the MBA's mortgage Market Composite Index decreased 34.2% percent compared with the previous week, the group said Wednesday.

The declines were led by the Refinance Index, which dropped 21.6% on an adjusted basis, the third weekly decrease and its lowest level since June 2010. The seasonally adjusted Purchase Index increased 1.1% from one week earlier and is at its highest level since the beginning of May 2010. The unadjusted Purchase Index decreased 22.9%, still 2.7% higher than the same week one year ago.

The four week moving average for the seasonally adjusted Market Index is down 5.8% but up 3.8% for the Purchase Index.

The refinance share of mortgage activity decreased to 74.9% from 78.6% percent the previous week, also the third consecutive weekly decrease. The adjustable-rate mortgage (ARM) share of activity increased to 5.7% from 5.3%.

The average rate for 30-year fixed-rate mortgages increased to 4.56% from 4.50%, with points increasing to 0.96 from 0.87. The average contract interest rate increased for the fourth time in five weeks and is at the highest level reported since August 2010. The rate for 15-year fixed-rate mortgages increased to 3.91% from 3.83%, with points decreasing to 0.88 from 1.04.