Mortgage applications fell 2% last week as mortgage rates edged slightly higher, though purchase applications rose to the highest level of the year.

The volume of mortgage loan applications fell 2% on a seasonally adjusted basis in the week ending April 1, the Mortgage Bankers Association said early Wednesday.

Refinancing application volume fell 6.2% from the previous week. Home-purchase loan applications jumped 6.7% week-over-week to its highest level of the year. The government purchase index increased 10.3% to its highest level since May 7, 2010. On an unadjusted basis, the MBA’s purchase index remained 16.8% lower than in the year-earlier week.

“Purchase application volume increased last week reaching the highest level of the year, but remains relatively low by historical standards, at levels last seen in 1997,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. “The increase last week was due to a sharp increase in applications for government loans. Borrowers were likely motivated to apply before a scheduled increase in FHA insurance premiums that became effective last Friday.”

A total of 61.2% of all loan applications last week were for refinancing existing mortgages, down from 64.3% in the prior week.

The average rate on a 30-year fixed mortgage edged higher to 4.93%, from 4.92% in the prior week, though it remained below the psychological benchmark of 5%.

“Rates were flat last week, but refinance activity fell, as the pool of borrowers who have both the incentive and the ability to qualify for a refinance continues to shrink,” Fratantoni added.

Data in recent weeks has shown the housing market continues to lag the overall economic recovery.

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