Mortgage application filings jumped 23.1% this past week on low interest rates and a dramatic upswing in refinancing activity, an industry trade group said Wednesday.

The Mortgage Bankers Association, which measures mortgage loan application volume through its market composite index, said home loan volume soared 23.1% from the previous week as the refinance index grew 26.4% from the previous week, reaching its highest level in five months.

Home purchase activity also increased, with the seasonally-adjusted purchase index increasing 10.3% from a week earlier.

Refinance activity made up 82.2% of all mortgage activity, compared to 80.8% a week before.

“Interest rates dropped last week due to continuing anxieties regarding the fragile economic situation in Europe,” said Michael Fratantoni, MBA’s vice president of research and economics. He added, “With mortgage rates reaching new lows, refinance volume jumped and MBA’s refinance index reached its highest level in the last six months. Purchase activity also increased as buyers returned to the market after the holiday season.”

Interest rates declined further last week, with the 30-year, fixed-rate mortgage on loans with conforming limits dropping to 4.06%, its lowest level in the history of the survey.

The 30-year, FRM with jumbo loan balances increased to 4.40% from 4.34%.

Meanwhile, the average 15-year, FRM fell to 3.33% from 3.40%, and the 5/1 ARMs remained unchanged at 2.90%. The 30-year, FRM backed by FHA declined to 3.91% from 3.96%.

Write to Kerri Panchuk.