Mortgage applications decreased 3.3% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending Dec. 12, 2014.

The Market Composite Index, a measure of mortgage loan application volume, decreased 3.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 4% compared with the previous week. The Refinance Index remained unchanged from the previous week. The seasonally adjusted Purchase Index decreased 7% from one week earlier. The unadjusted Purchase Index decreased 10% compared with the previous week and was 5% lower than the same week one year ago.

“Amid plummeting oil prices and heightened concerns regarding global economic growth, interest rates dropped sharply through the course of the week, with longer-term Treasury yields falling more than 10 basis points. The average mortgage rate also dropped during the week, with several lenders offering 30- year fixed-rate loans with rates below four%. The 30-year conforming rate was at its lowest level since May 2013, and the 30-year jumbo rate averaged 3.99% for the week,” said Mike Fratantoni, MBA’s Chief Economist. “Surprisingly, given this large drop in rates, applications for conventional refinance mortgages did not increase last week, but there was a notable pickup in government refinance applications, which were up 11% for the week, led by an almost 16% increase in VA refinance applications.”

The refinance share of mortgage activity increased to 66% of total applications, the highest level since December 2013, from 64% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.2% of total applications.

The FHA share of total applications decreased to 8.7% this week from 9.0% last week. The VA share of total applications increased to 10.6% this week from 9.6% last week. The USDA share of total applications remained unchanged at 0.8% this week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.06%, the lowest level since May 2013, from 4.11%, with points decreasing to 0.21 from 0.28 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 3.99%, the lowest level since May 2013, from 4.07%, with points increasing to 0.28 from 0.16 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.86% from 3.87%, with points decreasing to -0.04 from 0.03 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.33% from 3.35%, with points decreasing to 0.27 from 0.30 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs decreased to 3.00% from 3.11%, with points increasing to 0.43 from 0.19 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.