Mortgage applications surged 12 percent last week on lower interest rates, the Mortgage Bankers Association reports. 

The refinance index grew 11 percent last week, according to the MBA’s seasonally adjusted index. 

Applications for home purchases -- viewed as a leading gauge of future home buying -- edged up 12 percent for the week.

Meanwhile, mortgage rates fell last week, with the 30-year fixed-rate mortgage dropping from 4.72 percent to 4.66 percent last week. 

"The drop in rates was large enough to trigger a pickup in refinance volume," says Michael Fratantoni, the association's chief economist. "The increase in purchase volume is more likely reflecting an increase coming out of the holidays, beyond what our seasonal adjustment model anticipated."

Purchase applications are back to last November’s level, and applications are 10 percent below where they were a year ago, Fratantoni says. Mortgage applications to refinance have fallen more than 65 percent from year-ago levels. 

Source: The Wall Street Journal and CNBC