As expected mortgage application activity rebounded in the week ending Jan. 28 as the previous week was not adjusted for the Martin Luther King Jr. holiday. 

According to the Mortgage Bankers Association (MBA), the Refinance Index rose 11.7% to ~2261, while the Purchase Index gained 9.5% to ~9.5%.

"Applications increased this week relative to the holiday week," said Michael Fratantoni, MBA's vice president of research and economics. "Looking over the past two weeks, purchase applications are flat, and refinance applications are down about five percent."

As a percent of total applications, refinance share was 69.3% versus 70.3% previously. ARM share was 5.5%, up from 5.2%.

Interest rates were little changed with the average contract interest rate on 30-year fixed rate mortgages at 4.81% versus 4.80% in the previous week.

Points, however, were lower to 1.02 from 1.19 for 80% LTV loans, which lowered the effective rate.

At current mortgage rate levels, refinancing activity is likely to stay around current levels.

In recent research, Barclays Capital analysts said: "Assuming mortgage rates remain level, we would expect a 5% no-point rate to correspond to roughly a 2500 reading on the MBA index."

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