The Mortgage Bankers Association's Market Composite Index, which measures mortgage application volume, increased 7.8% on a seasonally adjusted basis last week from a week earlier, driven by refinancings to lower interest rates, the MBA said Wednesday.

The Refinance Index jumped 13.2% from the previous week and is at its highest level since early December. The seasonally adjusted Purchase Index, however, fell 3.2% from one week earlier. Unadjusted, it dropped 3.3% compared with the previous week and was 1.7% lower than the same week one year ago.

"The 30-year fixed mortgage rate is now 53 basis points below its 2011 peak, and has decreased for five straight weeks," said Michael Fratantoni, MBA's vp/research. "Over this five week span, the refinance index has increased by about 33%."

The four week moving average for the seasonally adjusted Market Index was up 3.6%, down 2.9% for the seasonally adjusted Purchase Index and up 7.2% for the Refinance Index.

Refinancings accounted for 66.7% of total applications, up from 63.1 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.3% from 6.5% of total applications from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.60% from 4.67%, with points decreasing to 0.94 from 1.10, the lowest that rate has been since last November. The rate for 15-year fixed-rate mortgages decreased to 3.75% from 3.81%, with points increasing to 1.22 from 1.05, also a low going back to November.

UBS home building analyst David Goldberg was not surprised by the decline in the Purchase Index. In a note to investors, he wrote, "The decline this week is consistent with our recent channel checks, which suggest that May is coming in below expectations. As such, we remain cautious in the near term. Specifically, we'd note that: 1) tighter underwriting standards are reducing the pool of potential buyers; and 2) confidence around home prices remains tenuous at best."