U.S. mortgage applications rose last week, reflecting a jump in demand for home refinancing loans as interest rates reached their lowest level since mid-March, data from an industry group showed on Wednesday.

Demand for loans to purchase a home, however, fell in the first week following the expiration of influential federal home buyer tax credits, which highlights the vulnerability of the hard-hit housing market in the absence of key support.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended May 7, increased 3.9 percent.

The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 4.4 percent.

The recent plunge in rates on U.S. Treasury securities, due to a flight to quality as investors worldwide sought shelter from the Greek debt crisis, benefited U.S. mortgage borrowers last week, Michael Fratantoni, MBA's Vice President of Research and Economics, said in a statement.

Mortgage rates are linked to yields on Treasuries and yields on mortgage-backed securities. Yields move inversely to price.

With mortgage rates widely viewed to be on an upward trajectory this year, existing homeowners came out in droves to take advantage of a drop below 5 percent on U.S. 30-year fixed-rate mortgages, the most widely used loan.

The MBA's seasonally adjusted index of refinancing applications increased 14.8 percent, reaching the highest level in six weeks.

Leif Thomsen, CEO of Mortgage Master in Walpole, Massachusetts, said fears over rising mortgage rates are provoking many people to make a move as opposed to sitting on the fence.

Rates are still exceptionally low and people, on average, are feeling better about their job situation and their future, he said.

The MBA said borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.96 percent, down 0.06 percentage point from the previous week, reaching the lowest level since week ended March 12.

People have been prepared for this day to come and now that it has arrived, they are acting quickly, he said.

Interest rates were above the year-ago level of 4.76 percent. An all-time low of 4.61 percent was set in the week ended March 27, 2009. The survey has been conducted weekly since 1990.

The MBA's Fratantoni said the government's recently expired home buyer tax credits likely pulled some sales into April that would otherwise have occurred in May or later. Buyers seeking to take advantage of the tax credits had to sign purchase contracts by April 30 and have until June 30 to close on the sales.

Recent robust data on pending, new and existing home sales point to a sector that has benefited smartly from these incentives and upcoming data will prove pivotal to how housing is faring without them.

The MBA's seasonally adjusted purchase index, a tentative early indicator of home sales, decreased 9.5 percent, the first drop in four weeks.

The MBA said fixed 15-year mortgage rates averaged 4.32 percent, down from 4.34 percent the previous week. Rates on one-year adjustable-rate mortgage, or ARMs, decreased to 6.86 percent from 7.03 percent.