The mortgage market picked up last week as rates dropped, uncertainty increased and refinancings soared. Purchase-only mortgages, however, languished.

The Mortgage Bankers Association's Market Composite Index, which measures mortgage application volume, shot up 21.7% on a seasonally adjusted basis, 20.9% unadjusted, from one week earlier. The Refinance Index jumped 30.4%, but the seasonally adjusted Purchase Index decreased 0.9%, 1.2% unadjusted, 4.9% higher than the same week one year ago.

"Amid substantial market turmoil last week, mortgage rates dropped to their lowest levels of the year, and refinance applications jumped," said Mike Fratantoni, MBA's vp of research and economics. "Over the past month, refinance application volume has increased by 63%. Refinance applications for jumbo loans increased by almost 75% relative to last week."

Fratantoni added, however, "Despite these low mortgage rates, applications for home purchase have remained little changed through the summer."

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.37% from 4.45%, with points increasing to 1.07 from 0.78. The rate for 15-year fixed-rate mortgages remained unchanged at 3.52%, with points decreasing to 0.96 from 1.02.

The four week moving average for the seasonally adjusted Market Index was up 9.7%. The four week moving average remained unchanged for the seasonally adjusted Purchase Index, while this average is up 13.7% for the Refinance Index.

The refinance share of mortgage activity increased to 75.6% of total applications from 70.1% the previous week. The adjustable-rate mortgage(ARM) share of activity decreased to 6.1% from 6.6% the previous week.