Mortgage applications dropped 3.2 percent last week as mortgage rates headed northward, according to a report issued this morning by the Mortgage Bankers Association. The MBA’s Market Composite Index, a measure of mortgage loan application volume, registered 649.5 for last week, a decrease of 3.2 percent on a seasonally adjusted basis from 671 one week earlier. On an unadjusted basis, however, the Index was up 5.3 percent compared with the same week one year earlier — suggesting a somewhat mixed picture regarging borrower sentiment towards the mortgage market. Refinance applications continued to plummet, falling 4.5 percent versus the previous week, while purchase applications fell as well. The MBA said its seasonally adjusted Purchase Index decreased 2 percent to 402.9 from 411.1 one week earlier.

Application volume has been trending downward for roughly the past month as concerns about the housing market, potential inflation and increasing mortgage rates have damped borrower appetite for new mortgages. The MBA said the four-week moving average for its seasonally-adjusted Market Index was down 0.8 percent to 670.8 from 676.3, while the four-week moving average wass down 1.5 percent to 2204.2 from 2238.2 for the Refinance Index. Refinance share of mortgage activity decreased to 44.5 percent of total applications from 45.1 percent the previous week, the third straight week refinance share has slipped. Adjustable-rate mortgage (ARM) share of activity also decreased, the MBA said, to 19.2 from 20.2 percent of total applications from the previous week. For more information, visit http://www.mortgagebankers.org.