Mortgage application volume increased 4.1% seasonally adjusted basis from last week, the Mortgage Bankers Association said Wednesday. The gain was driven entirely by refinancings.

On an unadjusted basis, the Index increased 3.6% and was 13.5% below its level of a year ago. The Refinance Index increased 8.0%, but was 16.3% lower than the comparable week last year. The seasonally adjusted Purchase Index fell 9.1%; unadjusted, it dropped 10.1% compared and was 1.1% lower than the same week one year ago.

"Unprecedented volatility in the stock market last week amid additional signs that the economy has slowed led to further drops in mortgage rates, with the 15-year rate reaching a new low for the MBA survey," said Mike Fratantoni, MBA's Vice President of Research and Economics. "Purchase application activity fell sharply over the previous week, likely the result of potential homebuyers hesitant to purchase in this highly volatile and uncertain environment."

The four week moving average for the seasonally adjusted Market Index is up 6.9%, down 2.2% for the seasonally adjusted Purchase Index and up 10.1% for the Refinance Index.

The refinance share of mortgage activity increased to 78.8% from 75.6% percent the previous week, the highest the refinance share has been since November 2010. The adjustable-rate mortgage share of activity decreased to 5.8% from 6.1%.

The average rate for 30-year fixed-rate mortgages decreased to 4.32% from 4.37%, a new low for the year, with points decreasing to 0.87 from 1.07. The rate for 15-year fixed-rate loans decreased to 3.47% from 3.52%, with points increasing to 1.08 from 0.96, the lowest level ever recorded by the MBA survey.