U.S. mortgage applications increased 4.1 percent on a seasonally adjusted basis in the week ending Dec. 9, led by an increase in refinances, according to the Mortgage Bankers Association (MBA).

Seasonally adjusted refinance activity increased by 9.3 percent, compared to the previous week, moving to its highest level since Nov. 4. Mortgage applications for new purchases decreased by 8.2 percent, compared to the previous week.

Refinances made up 79.7 percent of all applications, up from 76 percent in the previous week, and the highest refinance share in the year. Adjustable-rate mortgages (ARMs) made up 5.6 percent of applications, down slightly from 5.7 percent in the previous week.

Interest rates for all mortgage categories fell to the lowest levels of the year.

The average interest rate for 30-year fixed-rate mortgages of $417,500 or less was 4.12 percent, down from 4.18 percent the previous week. The average interest rate for 30-year fixed-rate mortgages over $417,500 was 4.47 percent, down from 4.52 percent in the previous year.

Federal Housing Administration (FHA)-backed 30-year fixed-rate mortgages had average rates of 3.94 percent, down from 3.98 percent in the previous week. Average interest rates for 15-year fixed-rate mortgages fell to 3.44 percent from 3.53 percent in the previous week. Interest rates for 5/1 ARMs fell to 2.93 percent from 3.01 percent in the previous week.

Overall average interest rates were 3.99 percent last week, according to Freddie Mac, near historic lows.