After a rush on refinances, homeowners took a breather last week, despite still seeing the lowest interest rates in about three years.
Overall mortgage application volume decreased 0.9% last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. Volume was still 70% higher annually, thanks to a stronger overall refinance market this year.
Demand fell as the recent sharp declines in mortgage interest rates moderated. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 3.90% from 3.93%, with points remaining unchanged at 0.35 (including the origination fee) for loans with a 20% down payment.
Mortgage applications to refinance a home loan increased just 0.4% from the previous week but were 180% higher than a year ago, when the interest rate was 91 basis points higher.
"In a week where worries over global economic growth drove U.S. Treasury yields 13 basis points lower, the 30-year fixed mortgage rate decreased just 3 basis points. As a result, the refinance index saw only a slight increase but remained at its highest level since July 2016," said Joel Kan, MBA's associate vice president of economic and industry forecasting. "The small moves in rates and refinancing are potentially signs that lenders may be approaching capacity constraints as they continue to deal with the largest wave of refinance activity in three years."
The refinance share of applications stood at almost 63%, its highest level since September 2016.
Low rates continued to offer little incentive to homebuyers, as the slowest days of August settle in. Mortgage applications to purchase a home decreased 4% for the week and were 5% higher annually.
The supply of homes for sale is starting to shrink again, especially on the lower end of the market. Prices remain high, and lower mortgage rates are not helping to improve affordability enough.