Mortgage rates fell last week, but mortgage demand was unimpressed.
Total mortgage application volume was essentially unchanged, down 0.1% compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. Volume was 60% higher than the same week one year ago, when interest rates were significantly higher.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 3.98% from 4.05%, with points remaining unchanged at 0.37 (including the origination fee) for loans with a 20% down payment.
"U.S. Treasury yields once again exhibited some intraweek volatility before declining sharply toward the end of the week," said Joel Kan, associate vice president of economic and industry forecasting.
Mortgage applications to refinance a home loan, which are most sensitive to weekly moves in rates, increased 2% for the week and were 144% higher than a year ago. Refinance volume is significantly higher this year because rates are so much lower. Last year, the average rate on the 30-year fixed was well over 5%.
Homebuyers pulled back slightly, more because of a tight for-sale market and having less to do with interest rates. Mortgage applications to purchase a home fell 3% for the week but were 7% higher than a year ago.
"Amidst persistent supply constraints in the entry-level price range, there's evidence that high-end homebuyers are more active this fall," said Kan. "The average loan size for purchase applications increased to its highest level since May."
Home prices are also starting to heat up again, due to that lack of supply. Affordability is weakening, and fastest at the low end of the market, where demand is strongest.
Mortgage rates moved sharply higher to start this week, as more positive news of a trade deal with China emerged. Rates are now at the highest level they've been in about three months.