(Reuters) - U.S. applications for home mortgages increased last week driven by an increase in refinancing activity and an uptick in purchase applications. The Mortgage Bankers Association (MBA) said on Wednesday its seasonally adjusted market index rose 2.1% in the week ending June 18 from a week earlier. This reflected a 2.8% increase in applications for refinancing and was 9% lower than the same week one year ago. The purchase index increased 0.6% from a week earlier. The average contract interest rate for traditional 30-year mortgages increased to 3.18% last week from 3.11% the prior week, the highest level in a month. “Despite the jump in rates, refinances increased for the second consecutive week, pushed higher by a 4 percent bump in conventional refinance applications,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement. “Purchase applications have regained an upward trend over the past few weeks. Activity was slightly higher for the third straight week, but remained lower than the same week a year ago.” Surging home prices and limited supply has continued to put a lid on home sales recently. The National Association of Realtors on Tuesday reported that existing home sales declined for the fourth consecutive month in May. Later on Wednesday, the Commerce Department will release data for sales of new U.S. single-family homes in May. Economists polled by Reuters forecast new home sales to increase to a seasonally adjusted annual rate of 870,000 units from 863,000 in April. Reporting by Evan Sully; Editing by Chizu Nomiyama Our Standards: The Thomson Reuters Trust Principles.