Applications for home mortgages surged last week, racking up the biggest increase in four months on a flood of refinancing demand as interest rates remained low, 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 up 15.5 percent in the week ended July 15. It was the largest increase since early March.

Ongoing turmoil in the financial markets primarily due to the sovereign debt crisis in Europe has brought mortgage rates back to their lowest levels of the year, Michael Fratantoni, MBA's vice president of research and economics, said in a statement. Refinance applications have surged in response.

The MBA's seasonally adjusted index of refinancing applications soared 23.1 percent, but the gauge of loan requests for home purchases dipped 0.1 percent.

The refinance share of mortgage activity rose to 70.1 percent of total applications from 65.6 percent the week before.

Fixed 30-year mortgage rates averaged 4.54 percent, easing from 4.55 percent.

(Reporting by Leah Schnurr; Editing by Diane Craft)

Mortgage