Mortgage application volume decreased 5.2% on a seasonally adjusted basis last week from the week before as rates jumped at the end of the Fed's QE2 Treasury buying program, according to the Mortgage Bankers Assocaition's Market Composite Index. The index measuring purchase-only mortgages rose.

On an unadjusted basis, the Index decreased 5.1% compared with the previous week, the Refinance Index fell 9.2% but the seasonally adjusted Purchase Index increased 4.8%. The unadjusted Purchase Index rose 4.4% and was 11.7% higher than the same week a year earlier.

"Stronger economic data towards the end of the week coupled with the end of the Fed's second round of quantitative easing helped bring mortgage rates to their highest level in over a month," said Michael Fratantoni, MBA's Vice President of Research and Economics. "Refinance activity, already constrained by a smaller pool of eligible borrowers, declined in response to the higher rates, but purchase applications picked up appreciably in the week before the July 4th holiday."

The four week moving average for the seasonally adjusted Market Index was down 0.5%. The four week moving average was up 0.8% for the seasonally adjusted Purchase Index and down 1.1% for the Refinance Index.

The refinance share of mortgage activity decreased to 66.4% of total applications from 69.5% the previous week. The adjustable-rate mortgage(ARM) share of activity increased to 6.1% from 5.8%.

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.69% from 4.46%, with points decreasing to 0.90 from 1.19. The average rate for 15-year fixed-rate mortgages increased to 3.79% from 3.64%, with points decreasing to 0.88 from 1.11.

Buck Horne at Raymond James cautioned investors against reading too much into the rise in purchase applications. In a research note, he wrote, "Purchase applications treading water. After falling 3.0% last week, the seasonally adjusted MBA purchase index rose 4.8% week-over-week in today's release. Aside from a brief pick up in March and April, the purchase index continues to indicate that buying activity has not gained any significant momentum this year."