In the first week of September, the total number of mortgage applications slumped very badly, and ended up bringing the volume across the sector down to levels not seen in years. Fortunately for the industry and the housing market as a whole, though, there was a big step in the right direction once again last week, potentially putting things back in the right direction for some time to come.

In all, the number of new home loan requests filed in the week ending Sept. 12 increased 7.9 percent on a seasonally adjusted basis, according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association. That change was driven largely by a huge push in refinance requests specifically, as current owners who wanted better deals on their existing home loans increased application volume 10 percent from the previous seven-day period. Meanwhile, purchase applications also jumped up, rising 5 percent.

"Application volume rebounded coming out of the Labor Day holiday, even as rates increased to their highest level in the last few months," said Mike Fratantoni, chief economist for the MBA. "Given the volatility in activity around the long weekend, it can be helpful to look at the change over a two week span: refinance applications are down 1.4 percent while purchase applications are up 2.1 percent. Purchase volume continues to track almost ten percent behind last year's levels."

What does this mean?
These changes came despite the fact that mortgage rates for the most popular loan products used in both refinances and purchases rose sharply, the report said. Those for 15-year fixed-rate mortgages – used mostly to refinance – surged to 3.56 percent from the previous 3.44 percent. Meanwhile, 30-year FRMs – primarily relied upon for buying a home – ticked up to 4.36 percent from 4.27 percent, the highest level observed since June.

And because there was such a big step forward for refinances in particular, the share of the mortgage market taken up by this loan type rose to 57 percent from the previous week's 55 percent, the report said. That constitutes the highest portion seen since February.

Mortgage application volume going forward, however, remains something that could be difficult to predict. Consumers may continue to be turned off by declining affordability, but may also come to accept current conditions in the market as being the value (in comparison with historic numbers) they still are.