Last week mortgage applications increased to the highest level since May due to low borrowing cost.

The Mortgage Bankers Association's index applications increased 13 percent to 668.5 last week from 592.8 in the week that ended September 11.

Low mortgage rates and the government tax credit helped ease the housing crisis.

"The steady improvement in housing is continuing," said Joel Naroff, chief economist at Naroff Economic Advisors Inc. in Holland, Pennsylvania. "This sector is likely to start adding to growth rather than holding back the economy."

In the report released today, last week the mortgage bankers' purchase increased to 288.3 from 279.9 in the previous week.

Mortgage rates continue to decrease. Last week, the average rate for a 30 year fixed decreased to 4.97 percent last week. At the end of March the rate reached the lowest of 4.61 percent.