Mortgage applications rose for the third-straight week, with the refinancing index climbing 15% following 19% gains in each of the prior two weeks.

The Market Composite Index of mortgage loan applications -- a measure of mortgage loan applications for purchases and refinancings -- for the week ended May 16 increased to 1562.8 on a seasonally adjusted basis from 1417.8 the prior week, according to the Weekly Mortgage Applications Survey of the Mortgage Bankers Association of America. On an unadjusted basis, the index increased by 9.7% and rose 196.2% compared with the same week a year earlier.

The seasonally adjusted purchase index fell 4.5% to 395.8 from 415.2 the previous week. The seasonally adjusted refinance index increased to 8351.1 from 7250.

Refinancing activity increased to 76% of total applications from 72.4% the prior week. The share of adjustable-rate mortgage activity dropped to 12.5% from 12.7% the previous week.

"Last week, long-term interest rates continued to decrease in response to the Federal Open Market Committee's May 6 comments regarding the current very low level of inflation," Mortgage Bankers Association economist Phil Colling said in a press release. "Interest rates are now at 45-year lows, and consumers are definitely taking advantage of these rates. MBA now expects 2003 to be yet another record year in terms of mortgage originations."

The average contract interest rate for 30-year fixed-rate mortgages fell to a record low of 5.17% from the previous record low of 5.27% a week earlier. The average contract interest rate for 15-year fixed-rate mortgages dropped to a record low 4.61% from the old record low of 4.68% the previous week.