Overall mortgage application volume posted strong growth during the first week of January as borrowers took advantage of falling interest rates, the Mortgage Bankers Association reported today.

The market composite index, which measures total home loan volume, increased 16.6 percent last week, rising to 671.1 on a seasonally adjusted basis from 575.6 one week earlier.

Refinancing activity saw the largest gains last week as the seasonally adjusted refinance index shot up 17.3 percent from the week before, followed closely by a 16.2 percent jump in the purchase index.

The refinance share of mortgage activity increased to 48.4 percent of total applications last week, while the adjustable-rate mortgage (ARM) share decreased to 20.1 percent, its lowest in three-and-a-half years.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.13 percent, compared with 6.22 percent a week earlier, with points including the origination fee increasing to 0.94 from 0.92 for 80 percent loan-to-value-ratio loans. Points, which are fees charged by lenders for loan processing, are expressed as a percent of the total loan amount.

The average rate for 15-year fixed-rate mortgages decreased to 5.85 percent from 5.93 percent, with points dropping to 0.98 from 1 for 80 percent loan-to-value-ratio loans.

Average rates for one-year ARMs decreased to 5.79 percent from 5.84 percent, and points held at 0.83 for 80 percent loan-to-value-ratio loans.

The Mortgage Bankers Association survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.

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