It is a testament to just how sensitive today's borrowers are to tiny rate moves.
Mortgage application volume fell 2.1 percent on a seasonally adjusted basis last week from the previous week. Volume, however, was 28 percent higher than the same week a year ago, fueled by still-elevated refinances, according to the Mortgage Bankers Association.
Applications to refinance a home loan did fall for the week, down 3 percent, but volume was nearly 45 percent higher than the same week one year ago, when interest rates were higher. The refinance share of mortgage activity now stands at 62.6 percent, a slight decrease for the week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.67 percent from 3.64 percent the previous week, with points increasing to 0.34 from 0.31 (including the origination fee) for 80 percent loan-to-value ratio loans.
While refinance applications remain elevated due to lower rates, closed refinances actually fell in July and are down from a year ago, according to Black Knight Financial Services. This may be due to very slow timelines in processing the loans, as lenders were overwhelmed by the refinance boomlet earlier in the summer, when rates dropped precipitously following the Brexit vote.
Mortgage applications to purchase a home, which are far less rate-sensitive week to week, fell 0.3 percent and are 7.7 percent higher than one year ago. Volume is now at a six-month low, just as the housing market moves into its historically slower season.
While home sales are moving slowly higher, the bulk of the activity remains on the higher end of the market. Luxury home builder Toll Brothers reported better-than-expected earnings for its third quarter, and executives said sales continue to benefit from low mortgage rates.
"If rates go up, we will deal with it. I don't see any terrific increase in rates coming, but right now I would say the market is strong," said Don Salmon, president of TBI Mortgage, a Toll Brothers subsidiary. "We are seeing demand from banks."
Sales of newly built homes surged in July to the highest level since 2007, according to the U.S. Census, but volume is still well below historical demand. Some, however, say continued growth in the housing market could give the Federal Reserve more reason to raise interest rates.