U.S. mortgage applications jumped last week as demand for loans to purchase homes rose for the first time in five weeks, the Mortgage Bankers Association said on Wednesday.

In addition, demand for home refinancing loans hit the highest level in 14 months as interest rates reached their lowest in at least 20 years, the industry group said.

The data provided a glimmer of hope for a housing market that has been struggling since the expiration of popular homebuyer tax credits.

The Mortgage Bankers Associations said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, increased 7.6 percent for the week ended July 16.

The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 4.9 percent.

The MBA said borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.59 percent, down 0.10 percentage point from the previous week, and the lowest level ever recorded in the survey, which has been conducted weekly since 1990.

Interest rates were also below their year-ago level of 5.31 percent.

The strength in purchase applications comes from government loans, likely indicating that prospective buyers are drawn by the lower down payment requirements, Michael Fratantoni, the MBA's vice president of research and economics, said in a statement.

The seasonally adjusted purchase index, a tentative early indicator of home sales, increased 3.4 percent after hitting a 13-year low the previous week. Demand, however, is down about 42 percent since the homebuyer tax credits expired.

Dean Maki, chief U.S. economist at Barclays Capital in New York, said the housing market is trying to find a bottom after the April 30 expiration of the tax credits.

The tax credits made things a lot more choppy, he said. We will continue to see a payback from the tax credits through the next few months and then we will return to a gradual upward trend. ...

We are expecting a continued gradual improvement in the labor market and that will also lend support to the housing market going forward, he said.

The MBA's seasonally adjusted index of refinancing applications increased 8.6 percent, reaching the highest level since the week ended May 15, 2009.

Refinance borrowers, aiming for the lowest possible rate, are getting conventional loans, Fratantoni said in his statement.

The MBA said fixed 15-year mortgage rates averaged 4.05 percent, down from 4.12 percent the previous week, a record low. Rates on one-year adjustable-rate mortgage, or ARMs, decreased to 7.17 percent from 7.20 percent.

The Commerce Department on Tuesday said U.S. housing starts in June hit their lowest level in eight months.

More insight into the state of the housing market will emerge on Thursday when the National Association of Realtors releases data on existing home sales in June.

(Editing by Leslie Adler)

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