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Refinances drive meager mortgage volume yet again

A sign offering mortgage help at a Bank of America branch, New York City.
Scott Mlyn | CNBC

The lazy days of summer are clearly prevailing when it comes to mortgage-dependent homebuyers.

With mortgage rates still wavering within a tight range, total mortgage application volume rose 1.6 percent week to week on a seasonally adjusted basis, according to the Mortgage Bankers Association; however, it was all on the back of refinances. Applications to refinance jumped 4 percent from the previous week but are still off 39 percent from the same week a year ago.

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Mortgage applications to buy a home continued to lose strength, down 1 percent from one week ago. Purchase applications are down 14 percent from a year ago, a wider annual margin than previous weeks.

What's behind homeownership drop

This as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.35 percent from 4.33 percent. Mortgage rates have barely moved in the past several months. They did take a sizable jump in June of last year, so Wednesday's weak mortgage application volume is no longer being compared to significantly lower rates, as they were in the winter and spring of this year. The expectation has been that rates would move higher, but so far, despite turmoil overseas, they have not.

"Global stock markets came under strong selling pressure as headlines emerged suggesting Russia could soon invade Ukraine," wrote Matthew Graham of Mortgage News Daily.

Read MoreHigher mortgage rates not deterring buyers

"More often than not, when markets respond to such geopolitical headlines, one of the key ingredients is increased demand for safe-haven assets such as U.S. Treasuries and other 'bonds.' The mortgage-backed-securities (MBS) that dictate mortgage rates are almost always moving in the same direction as Treasuries, but by varying degrees. Tuesday, for instance, MBS moved higher and lower at the same time as Treasuries, but they are still slightly weaker compared to Monday, while Treasuries are slightly stronger," he added.

Mortgage bankers did report slightly eased credit availability in July, but largely due to more jumbo adjustable-rate loans to higher creditworthy borrowers. Meanwhile the Federal Reserve's Senior Loan Officer Opinion Survey indicated about 40 percent of large banks reported easing credit standards for prime borrowers. The news was not as positive for subprime borrowers. Of 70 banks responding, 66 said they no longer originate subprime loans.

—By CNBC's Diana Olick.