"Rates dipped slightly last week, and conventional refinance application volume rose to its highest level in two weeks, as borrowers locked in amidst forecasts of rising rates," said Michael Fratantoni, chief economist for the MBA. "However, FHA [loans insured by the federal government] refinance volume declined 10 percent last week, following several weeks of very strong volume in response to the decrease in FHA mortgage insurance premiums."
There are an ever dwindling number of borrowers who can benefit from a refinance, given how long rates have been so low. Clearly the threat of higher rates spooked some, but not a lot.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.96 percent from 3.99 percent, for 80 percent loan-to-value ratio (LTV) loans, according to the MBA's weekly survey.
Read MoreKiller investment: 'Walking Dead' town for sale on eBay
Mortgage applications to purchase a home fell 0.2 percent week-to-week and are down the same amount from a year ago. Rough winter weather continued to plague much of the nation, but builders and Realtors alike say weather is not the problem, home prices are.
Price gains are beginning to accelerate yet again. Gains had been easing throughout 2014, amid weaker home sales. That was because investors pushed prices too far too fast in 2013. Now, it's not investors pushing prices, but a sheer lack of homes for sale in markets large and small across the nation. Bidding wars are back.
January home prices rose nearly 6 percent from a year ago, according to CoreLogic. The annual gain in December was 5 percent.
Read MoreHomeowners who just won't go