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A spring thaw for mortgages?

Nadya Lukic | E+ | Getty Images

It is still snowing in the Northeast on Wednesday, but warmer weather in recent weeks may have had more potential home buyers out on the prowl.

Mortgage applications to purchase a home rose 3 percent last week from the previous week on a seasonally adjusted basis, according to a weekly survey from the Mortgage Bankers Association. This was driven mainly by an increase in conventional (Fannie Mae and Freddie Mac) applications, as demand for mortgages backed by the Federal Housing Administration, the government insurer of home loans, were flat week-to-week. FHA loans require much lower down payments than conventional loans, just 3.5 percent minimum.

(Read more: Housing's mixed signals: Bubble or not?)

Purchase applications are still down nearly 17 percent from a year ago, with some still blaming the weak home sales market on rough weather in much of the nation. All-cash buyers continue to represent an outsized share of the housing market at over one- third of all sales.

Mortgage application volume has been anemic so far this year, as rising rates weigh on the refinance market. Applications to refinance decreased 8 percent last week from the previous week, as the average contract rate on 30-year fixed mortgages with conforming loan balances ($417,000 or less) rose to 4.56 percent from 4.5 percent, with points increasing as well. That is the highest level in three months.

Refinance volume is now down nearly 68 percent from a year ago and represents just over half of all mortgage activity. It had been up in the 80 percent range just over a year ago, when average rates hovered around 3.5 percent.

Analysts at Bank of America this week expressed concern that the Federal Reserve's tapering is having a far more negative effect on credit availability than anticipated:

"As of now, purchase activity has yet to recover from the body blow of higher rates that followed last spring's taper talk. We remain skeptical that the weakness is just due to the weather. We believe the demand side for mortgage credit remains intrinsically weak and find it hard to believe that it will strengthen into higher rates. Further weakening seems more likely to us if the Fed were to prematurely raise rates."

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More borrowers had been opting for adjustable-rate mortgages last year; in fact the ARM share of purchase applications doubled between the end of 2012 and 2013. ARMs, however, are still a small share of the market, according to a report from Fannie Mae, due to new regulations in the market that put more liability on lenders. Underwriting standards can be particularly strict for adjustable-rate loans.

The adjustable-rate mortgage share of activity remained unchanged last week at 8 percent of total applications, according to the mortgage bankers' report.

By CNBC's Diana Olick.

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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