Mortgage applications continue to decline, as refinancing demand wanes despite historically low rates that slid further last week. The Mortgage Bankers Association index fell 0.2% for the week ended Oct. 2, hurt by a another drop in the refinancing index of 2.5%, although seasonally adjusted purchase activity rose 9.3% to the highest point since early May. The unadjusted index fell 0.3% last week, as the unadjusted purchase index increased 9.1% and is now 34.7% below the year ago. "The increase in purchase activity was led by a 17.2% increase in FHA applications, while conventional purchase applications also increased by 3.6 percent," according to Jay Brinkmann, MBA's chief economist. "This is the second straight weekly increase in purchase applications and the highest purchase index level since the expiration of the homebuyer tax credit program. One possible driver of last week's big increase in FHA applications was a desire by borrowers to get applications in before new FHA requirements took effect Oct. 4, which included somewhat higher credit score and down payment requirements." In four-week moving averages, the seasonally adjusted market index is down 3%, the purchase index is up 2% and the refinance index is down 4.2%. Refinancings accounted for 78.9% of all mortgage applications last week, down from 80.7% the week earlier. The MBA said interest rates for 30-year fixed and 15-year fixed mortgages fell once again last week to new record lows. The average rate for the 30-year fell to 4.25% from 4.38% and the 15-year decreased to 3.73% from 3.77%. On Tuesday, Zillow said its Mortgage Marketplace produced an average rate of 4.16% for a 30-year, fixed loan, which is the lowest figure since the report launched in April 2008. Write to Jason Philyaw.