Borrowers expecting the Fed to raise interest rates rushed to apply for mortgages last week.
A strong monthly employment report Friday also helped the rise in mortgage applications, which jumped 1.2 percent on a seasonally adjusted basis last week from the previous week, according to the Mortgage Bankers Association.
The Federal Reserve is expected to announce its first interest rate increase in more than nine years when it meets next week.
Refinance volume was entirely behind the gains. Applications to refinance rose 4 percent from the previous week, seasonally adjusted (the previous week included an adjustment for the Thanksgiving holiday).Refinance applications are even up slightly from a year ago, when interest rates were lower.
Applications to purchase a home were basically flat, up 0.04 percent from one week earlier. Purchase volume, however, is 29 percent higher than the same week one year ago, indicating stronger home sales to come. A monthly survey of consumer sentiment by Fannie Mae found a slight improvement in respondents saying now is a good time to buy, despite challenges in affordability and tight supply of homes for sale.