Despite an increase in interest rates, mortgage applications edged higher last week, continuing a rebound from February's 13-year low in mortgage demand.

In its weekly application survey, the Mortgage Bankers Association reported that overall mortgage demand rose 0.5 percent from the week before on a seasonally adjusted basis. Unadjusted, the index increased 1.2 percent from the previous week.

Demand for applications continues to rise after weeks of declines at the beginning of the year were fueled speculation that the housing market had lost momentum after it stabilized in the final quarter of 2009.

The rise in total application volume was helped by a 1.5 percent increase in the MBA's refinance index, and a 5.7 percent jump in the seasonally adjusted purchase index. Unadjusted, the purchase index rose 7.2 percent from the week before, and was 10.7 percent lower the same week in 2009.

Interest rates increased across the board last week, as the average contract interest rate on 30-year fixed-rate mortgages moved back above the psychological tipping point of five percent, increasing from 4.95 percent to 5.01 percent.

Rates on 15-year fixed-rate mortgages increased to 4.32 percent from 4.27 percent, while rates on one-year adjustable-rate mortgages rose to 6.80 percent from 6.77 percent.

The MBA's refinance share of mortgage activity decreased from 69.1 percent to 67.2 percent of total applications, its lowest number since last October, when it hit 66.1 percent. The adjustable-rate mortgage share of mortgage activity rose to 5.1 percent of total applications from 4.8 percent the previous week.

The four week moving average for the seasonally adjusted market index is up 0.8 percent. For the adjusted purchase index, the average is up 0.7 percent, and up 1 percent for the refinance index.