The Mortgage Bankers Association's Market Composite Index, which gauges mortgage loan application volume, rose 4.0% on a seasonally adjusted basis last week from a week earlier as rates fell. The gain was driven largely by a 6% jump in the seasonally adjusted Refinance Index.

The Purchase Index also was up 0.3%, seasonally adjusted, and up 1.1% from the previous week on an unadjusted basis. That was down 36.9% from the comparable week in 2010.

The four week moving average for the seasonally adjusted Market Index was down 0.9%, with the Purchase Index down 2.4% and the Refinance Index flat.The refinance share of mortgage activity increased to 62.7% from 61.6%, and the ARM share rose to 6.7% from 6.5%.

The average interest rate for 30-year fixed-rate mortgages decreased for the third consecutive week to 4.76% from 4.80%, with points decreasing to 0.76 from 1.00 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. It was the lowest 30-year fixed contract rate since December 3, 2010. The rate for 15-year fixed-rate mortgages decreased to 3.96% from 4.03% percent, with points decreasing to 0.82 from 0.96. That was the lowest 15-year fixed contract rate since November 26, 2010.