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By:: Kara Johnson | December 08, 2010

Mortgage applications for home purchases inched up again last week, even as interest rates continued their steady rise over the past month.

Applications for mortgages to buy a home increased a seasonally adjusted 1.8 percent last week, according to today’s figures from the Mortgage Bankers Association (MBA), the third consecutive weekly increase in a row.

The MBA Purchase Index, a leading indicator for home sales, is now at its highest level since last May, when borrowers were seeking to close purchases qualifying for the homebuyer tax credit. The index has risen an average of 2.8 percent over the past four weeks.

The figures are a hopeful sign that the housing market is recovering, although very slowly. The National Association of Realtors recently reported that pending home sales posted a more than 10 percent increase in October, although sales remain quite weak compared to pre-downturn levels.

Interest rates on fixed-rate loans continue to rise, meanwhile, continuing their climb back from record lows. Average rates on 30-year fixed-rate mortgages rose to 4.66 percent last week, up from 4.58 percent the week before, for loans with an 80 percent loan-to-value ratio. Average rate on 15-year fixed-rate mortgages rose to 3.98 percent, up from 3.91 percent the previous week.

The steady rise in mortgage rates in recent weeks has discouraged interest among borrowers in refinancing existing mortgages, with refinance applications declining as interest rates rise. The MBA Refinance Index fell 1.4 percent last week, the fourth consecutive weekly decline. Refinance applications have fallen an average of 10.8 percent a week over the past four weeks, according to the MBA.

The survey covers mortgage application activity for the week ending Friday, Dec. 3.

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