Mortgage application volume rose 4.1% last week amid low home-loan rates and a strong refinance market, the Mortgage Bankers Association said.

Refinance application volume was up 5% for the week and was 122% higher than a year ago.

"Mortgage applications increased last week despite mixed results from the various rates tracked in MBA's survey. The average 30-year fixed rate mortgage rose slightly to 3.20 percent, but some creditworthy borrowers are being offered rates even below 3 percent. As a result, these low rates drove a 5 percent weekly gain in refinances and a robust 122 percent increase from a year ago," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting.

"There continues to be strong homebuyer demand this summer, as home shoppers have returned to the market in many states. Purchase activity increased again last week and was up 19 percent compared to last year - the ninth straight week of year-over-year increases."

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased to 3.20 percent from 3.19 percent.

The average contract interest rate for 15-year fixed-rate mortgages increased to 2.71 percent from 2.70 percent.

Meanwhile, U.S. home sales increased by the most on record in June, boosted by historically low mortgage rates, but the outlook for the housing market is being clouded by low inventory and high unemployment amid the COVID-19 pandemic.

The National Association of Realtors said on Wednesday existing home sales jumped 20.7% to a seasonally adjusted annual rate of 4.72 million units last month. That the biggest gain since 1968 when the NAR started tracking the series.

Data for May was unrevised at a 3.91 million unit pace, the lowest level since October 2010, Reuters explained.

June's increase ended three straight months of decreases, though home resales remained below their pre-pandemic level. Economists polled by Reuters had forecast sales rebounding 24.5% to a rate of 4.78 million units in June.

Existing home sales, which make up about 85% of U.S. home sales, fell 11.3% on a year-on-year basis in June.

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