The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and home purchase demand, rose 4.1 percent in the week ended Aug. 12.
The MBA's seasonally adjusted index of refinancing applications jumped 8.0 percent to their highest level since early November, but the gauge of loan requests for home purchases slumped 9.1 percent.
Wild swings in the stock market last week and worries over the strength of the economy likely made potential homebuyers hesitant and drove purchase application activity down, Mike Fratantoni, MBA's vice president of research and economics, said in a statement.
The increased uncertainty came on the heels of the downgrade of the United States' credit rating by Standard & Poor's.
Refinancing accounted for 78.8 percent of total applications, up from 75.6 percent the week before.
Fixed 30-year mortgage rates averaged 4.32 percent, down from 4.37 percent the week before.