The Mortgage Bankers Association’s weekly survey of mortgage application volume found a strong surge in refinancing activity as rates dropped to two-year lows to start the new year. Overall application activity was 906.4, an increase of 28.4 percent on a seasonally adjusted basis from 706.0 one week earlier and up 39 percent from year-ago levels.

The application index is calibrated to March 16, 1990; a reading of 906.4 means that application activity is a little more than 9 times greater than when the index was first established.

Refinancing activity increased 43.4 percent to 3575.5 from 2494.2 the previous week — which was shortened by the New Year’s holiday — and the seasonally adjusted purchase index increased 11.4 percent to 461.2 from 414.0 one week earlier. FHA-led refinancing activity also saw a jump, the MBA said, rising 17.6 percent from week-ago levels on a seasonally-adjusted basis.

At least some of the jump, however, was attributed to holiday volatility as much as to mortgage rates that have reached levels not seen since 2005.

“There is alot of volatility in the index right now, even on a seasonally-adjusted basis,” said a mortgage banker reached by HW, who wished to remain anonymous. “It’s tough to adjust the data completely, so I’d put more confidence in the unadjusted annual comparison.”

Refinance share of mortgage activity increased to 62.7 percent of total applications from 57.7 percent the previous week; ARM share of activity decreased to 9.2 from 9.3 percent.

For more information, visit http://www.mortgagebankers.org.