The Mortgage Bankers Association (MBA) released its weekly report on mortgage applications this morning, noting a rise of 3.4% in the group’s seasonally adjusted composite index, following a drop of 8.1% for the previous week.

The seasonally adjusted purchase index rose by 2% from the last report to its highest level since May 2010. On an unadjusted basis, the composite index increased 16% week-over-week. Year-over-year the unadjusted purchase index is up 21% for the week and 16% year-over-year.

The share of refinancings dropped slightly from 79% to 78%. Low mortgage rates and affordable prices are attracting more buyers.

The average contract interest rate for a conforming 30-year fixed-rate mortgage rose from 3.67% to 3.73%. The rate for a jumbo 30-year fixed-rate mortgage increased from 3.95% to 3.96%. The average interest rate for a 15-year fixed-rate mortgage fell from 2.95% to 3%.

The contract interest rate for a 5/1 adjustable rate mortgage increased from 2.60% to 2.72%.

The drop in new household formation that began during the financial crisis of 2009 may finally be over. Home prices are rising as more buyers come into the market. Mortgage interest rates are rising slowly, but higher demand from buyers will do that.

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