Mortgage application volume increased 15.5% on a seasonally adjusted basis last week, the Mortgage Bankers Association said Wednesday, noting that the prior week included the Presidents' Day holiday but was not adjusted.

The MBA's Market Composite Index rose to 514.2 from the previous week, 18.8% below the comparable week in 2010, when homebuyers tax credits were in effect. On an unadjusted basis, that represented a 16.1% increase compared with the previous week.

The seasonally adjusted Purchase Index increased 12.5% from the prior week to its highest level so far this year. Unadjusted, the Purchase Index increased 14.3% sequentially but was still 14.3%.

"Taking into account typical seasonal patterns, purchase applications rose to their highest level of the year last week," said said Michael Fratantoni, MBA's vp of research and economics. "On an unadjusted basis, purchase application activity is the highest since last May. An improving job market is beginning to pave the way for an improving housing market."

The four week moving average for the seasonally adjusted Market Index was up 2.7%. The four week moving average was up 1.2% for the seasonally adjusted Purchase Index and up 3.6% for the Refinance Index.

The refinance share of mortgage activity increased to 65.5% of total applications from 64.9% the previous week. The adjustable-rate mortgage(ARM) share of activity increased to 6.0% from 5.5%.

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.93% from 4.84%, with points decreasing to 0.87 from 1.29 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The rate for 15-year fixed-rate mortgages remained unchanged at 4.17%, with points increasing to 1.15 from 1.07.

David Goldberg, home building analyst at UBS, remained cautious despite the apparently positive data. In a research note, he wrote, "Interestingly, the index is 6.2% below the level for the week ending 11/26; over the same timeframe, the homebuilding stocks have risen 22.0%. Further, our recent channel checks with private builders cause us to remain cautious. Specifically, we'd note that: 1) comps get tougher in Mar./Apr., 2) tighter underwriting standards are reducing the pool of potential buyers; and 3) confidence around home prices remains tenuous at best."