Applications for U.S. home mortgages jumped last week, recouping the previous week's steep decline as interest rates continued to fall, an industry group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, spiked 12.8 percent in the week Dec 2.

The MBA's seasonally adjusted index of refinancing applications also jumped, gaining 15.3 percent, while the gauge of loan requests for home purchases rose 8.3 percent.

Applications increased significantly as mortgage rates dropped to their lowest levels in about two months, Michael Fratantoni, MBA's vice president of research and economics, said in a statement.

In particular, refinance applications increased sharply, with some lenders seeing refinance volume double. Despite this surge, aggregate refinance activity is still below levels reported two weeks ago.

The refinance share of total mortgage activity gained to 76.0 percent of applications from 73.9 percent the week before.

Fixed 30-year mortgage rates averaged 4.18 percent, down 3 basis points from 4.21 percent the week before.

The survey covers over 75 percent of U.S. retail residential mortgage applications, according to MBA.

(Reporting By Leah Schnurr; Editing by Diane Craft)

(This story is corrected to clarify the first paragraph to show comparison is to previous week, not last week)

Mortgage