In a week that saw no change in interest rates and a holiday tacked onto the end, mortgage volume really had nowhere to go but down.
Total applications fell 3.1 percent for the week, according to the Mortgage Bankers Association's seasonally adjusted report, which accounted for the Thanksgiving holiday.
Applications to refinance a home loan led the way down, falling 8 percent for the week and marking the lowest level since January. They were down 18 percent from a year ago. Interest rates now hover just slightly higher than one year ago, but many borrowers have already refinanced at low rates.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $424,100 or less remained unchanged from the week prior at 4.20 percent, with points decreasing to 0.34 from 0.42, including the origination fee, for 80 percent loan-to-value ratio loans. The effective rate decreased from last week.
"The Fed's FOMC minutes indicated that despite the near certainty of a December rate increase, persistently low inflation remained a concern, pushing Treasury rates slightly lower last week," said Joel Kan, an MBA economist.
Mortgage applications to purchase a home rose nearly 2 percent last week and stood 6 percent higher than the same week a year ago. Sales of existing homes have been suffering because of a lack of supply, but sales of newly built homes have climbed for two-straight months.
Bond markets, which dictate interest rates, had a lot to digest at the start of this week, especially Tuesday. That morning the Senate Banking Committee held a confirmation hearing for Jerome Powell, the nominee for chairman of the Federal Reserve.
"Not only did Powell handle himself well, but he struck a more rate friendly tone than was generally expected," wrote Matthew Graham, chief operating officer of Mortgage News Daily. He noted that bond markets, which underlie day-to-day rate movement, liked what they heard, as did stocks, which also benefit from easier Fed policy.
By Tuesday afternoon, news broke that North Korea had launched a missile toward Japan. A few hours later, the Senate passed its tax reform bill out of committee, readying it for a full Senate vote. The latter put upward pressure on interest rates, as the stock market rallied more than 200 points, but by the end of the day most lenders were unchanged due to all the volatility.