As mortgage rates dropped to new lows for the year, loan application volume increased from one week earlier, according to the Mortgage Bankers Association.

The MBA's Weekly Mortgage Applications Survey for the week ending Sept. 8 found that the refinance index increased 9% from the previous week. This week's results included an adjustment for the Labor Day holiday.

The refinance application share increased to 51% from 50.9% the previous week.

The market composite index, a measure of mortgage loan application volume, increased 9.9% on a seasonally adjusted basis, and on an unadjusted basis it decreased 13% compared with the previous week.

The seasonally adjusted purchase index increased 11% from one week earlier, while the unadjusted purchase index decreased 13% compared with the previous week and was 7% higher than the same week one year ago.

Adjustable-rate loan application activity decreased to 6.7% from 7.2%, while the share of applications for Federal Housing Administration-guaranteed loans increased to 9.9% from 9.6%.

The share of applications for Veterans Affairs-guaranteed loans increased to 10.3% from 9.7% and the U.S. Department of Agriculture/Rural Development share remained unchanged at 0.7%.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) decreased 3 basis points to 4.03%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100), the average contract rate increased 4 basis points to 4%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased 4 basis points to 3.94%, while for 15-year fixed-rate mortgages the average decreased 4 basis points to 3.3%.

The average contract interest rate for 5/1 ARMs increased 3 basis points to 3.17%.