The Mortgage Bankers Association's Market Composite Index, a measure of weekly application volume based on surveys of the trade group's members, increased a seasonally adjusted 9.9% for the seven-day period ending Jan. 5. Data was adjusted to account for the new-year holiday.

One week earlier, the index posted a fall of 9.4% over the final 14 days of 2023. On an annual basis, seasonally adjusted activity approached closer to the numbers of a year earlier, but was still 2.1% lower.

Both purchases and refinances finished higher, even though mortgage rates climbed higher for the second week in a row, tempering some of the rapid decline they experienced for much of December. 

"The increase in purchase and refinance applications for both conventional and government loans is promising to start the year but was likely due to some catch-up in activity after the holiday season and year-end rate declines," said Joel Kan, MBA vice president and deputy chief economist, in a press release.

"Mortgage rates and applications have been volatile in recent weeks and overall activity remains low," Kan added.

Investors appeared to reevaluate some of their initial enthusiasm over pivots in Federal Reserve policy to come in 2024, helping drive rates higher. The contract average of the 30-year fixed-rate mortgage with conforming balances that make them eligible for sale to Fannie Mae and Freddie Mac increased 5 basis points to 6.81% compared to 6.76% seven days earlier. Borrowers typically used 0.61 in points for 80% loan-to-value ratio applications, the same as in the previous week.

Last week's survey was the first to include higher conforming balance amounts, which increased at the beginning of the year to a minimum of $766,550 for single-family homes. In areas deemed high cost by the Federal Housing Finance Agency, conforming limits are now $1,149,825.

The Refinance Index leaped 18.8% from the prior survey and reversed its end-of-year drop, with both conventional and government-backed activity surging. Activity also came in 6.8% higher year-over-year. Relative to overall activity, refinances also grew to a 38.3% share, up from 36.3% the previous week.

At the same time, the seasonally adjusted Purchase Index also increased, but by a more muted 5.6%. Volumes came in 6.8% below levels of a year ago. Recent activity has been buoyed, in part, by listings returning to the market, according to data from Redfin.

The average purchase-application size in MBA's survey also decreased to its smallest amount since early December and among the lowest in the past year, finishing at $402,900, possibly pointing to interest in the more affordable end of the market.