Applications for home mortgages surged more than 20 percent last week, fueled by a wave of refinancing demand as interest rates dropped, 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, jumped 23.1 percent in the week ended January 13.

The MBA's seasonally adjusted index of refinancing applications climbed 26.4 percent, while the gauge of loan requests for home purchases rose 10.3 percent.

With mortgage rates reaching new lows, refinance volume jumped, Michael Fratantoni, MBA's vice president of research and economics, said in a statement. Purchase activity also increased as buyers returned to the market after the holiday season.

The refinance share of total mortgage activity rose to 82.2 percent of applications from 80.8 percent the previous week, making it the highest refinance share since October 2010.

Fixed 30-year mortgage rates averaged 4.06 percent, down 5 basis points from 4.11 percent.

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

(Reporting By Leah Schnurr; Editing by Leslie Adler)

Mortgage