Mortgage applications inched up last week as interest rates fell, the Mortgage Bankers Association reported today.

The market composite index, which measures total home loan volume, gained 0.1 percent on a seasonally adjusted basis from the week before.

Despite a 2.6 percent drop in refinancings, the index that tracks home purchases rose 2 percent, which pushed overall activity higher. As a result, refinancings lost market share — down from 38.7 percent of total applications to 37.8 percent — while the adjustable-rate mortgage (ARM) share increased from 20.4 percent to 21 percent, according to MBA.

Borrowing costs were slightly more affordable last week, as the average contract interest rate on 30-year fixed-rate mortgages fell from 6.6 percent to 6.5 percent, rates on the 15-year fixed-rate loan sank to 6.2 percent from 6.24 percent, and the one-year ARM decreased to 5.49 percent from 5.51 percent.

Points, or loan-processing fees expressed as a percent of the total loan amount, averaged 1.69 on the 30-year loans, 1.43 on the 15-year, and 1.17 on one-year ARMs. These points include the origination fee and are based on loan-to-value ratios of 80 percent.

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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