Mortgage applications rose for the first time in five weeks as interest rates fell to their lowest level since October, spurring a surge in demand for home loans, an industry trade group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended January 6 increased 9.9 percent.

The group's seasonally adjusted index of refinancing applications increased 9.9 percent to 1,497.5. The index rose for a second consecutive week.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.08 percent, down 0.07 percentage point from the previous week's 6.15 percent, marking its fifth consecutive weekly decline. Rates were at their lowest level since the week ended October 21, 2005, when it touched 6.06 percent.

The 30-year fixed-rate mortgage, the industry benchmark, is substantially above its 2005 low of 5.47 percent in late June, but below its 6.33 percent high in the week of November 11.

The MBA's seasonally adjusted purchase mortgage index rose 9.3 percent to 457.4 from the previous week's 418.3. The index is considered a timely gauge on U.S. home sales.

Fixed 15-year mortgage rates averaged 5.66 percent, down from 5.74 percent the previous week. Rates on one-year adjustable-rate mortgages (ARMs) increased to 5.42 percent from 5.41 percent.

Analysts say an increasing number of borrowers are converting their ARMs into new fixed-rate loans as the difference between adjusted and fixed mortgage interest rates narrow. They say this has been a factor in refinancing demand.

The MBA's survey covers about 50 percent of all U.S. retail residential mortgage originations. Respondents include mortgage bankers, commercial banks and thrifts.