U.S. mortgage applications dipped slightly last week as higher purchase applications nearly offset the drop in refinancings, the Mortgage Bankers Association said.

The MBA's seasonally adjusted market composite index slipped 0.1% in the week ended Aug. 31 from the previous week. On an unadjusted basis, the index dropped 2%.

The refinance index dropped 1%, while the refinance share of mortgage activity increased to 38.9% of total applications from 38.7% a week ago.

The purchase index rebound, adding 0.9% after seasonal adjustments. On an unadjusted basis, the purchase index dropped by 2% compared with the prior week.

"The job market remains quite strong, supporting purchase demand, which is 2 percent higher than last year at this time," said Mike Fratantoni, chief economist at the MBA. "However, home prices, while decelerating, continue to rise faster than household income."