Mortgage applications for purchases and refinances were higher than the week before as interest rates continued to fall towards historic lows.

The Mortgage Bankers Association's weekly index increased 1.4% on a seasonally adjusted basis for the period ending Aug. 15. Last week, the index decreased 2.7%.

Refinance activity was up 3% compared to the previous week, the Washington-based trade group said, while the purchase index was down 0.4%. The refinance share of mortgage activity rose to 55% of total applications, which is one percentage point higher than a week before. Adjustable-rate mortgages accounted for 7.8% of total applications, the MBA said in Wednesday's report.

Overall application volume for conventional mortgages increased, according to Mike Fratantoni, chief economist for the Mortgage Bankers Association. However, he added that there was a 5.9% decline in the number of applications for government mortgages as both purchase and refinance applications weakened.

"Within the government sector, this decline was led by an 8% decline in unadjusted Department of Veterans Affairs applications, while Federal Housing Administration and Rural Housing Service unadjusted applications also fell by 5% and 3%, respectively," Fratantoni said.

Every interest rate category experienced week over week declines, the MBA revealed. The average contract rate for a 30-year fixed mortgage decreased six basis points, to 4.29%. A 30-year jumbo loan's rate fell six basis points, to 4.18%. Mortgages backed by the FHA saw their average 30-year rates drop to 3.99%, down five basis points. A 15-year fixed-rate mortgage decreased to 3.44% from 3.48%.

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