The Mortgage Bankers Association (MBA) reported on Wednesday the mortgage application volume in the U.S. edged up 0.1 percent in the week ended May 1, following a 3.3 percent drop in the previous week.

According to the report, refinance applications decreased 1.7 percent, while applications to purchase a home surged 5.8 percent.

Meanwhile, the average fixed 30-year mortgage rate fell to 3.40 percent from 3.43 percent. That was the lowest level in the MBA's survey, which began in 1990.

"Despite lower rates, refinance applications dropped, as many lenders are offering higher rates for refinances than for purchase loans, and others are suspending the availability of cash-out refinance loans because of their inability to sell them to Fannie Mae and Freddie Mac," noted Mike Fratantoni, MBA's senior vice president and chief economist.