With no major move in mortgage rates, there was no sudden incentive to refinance a home loan last week, so fewer people did.
That drove overall mortgage application volume down 2.5% from the previous week, according to the Mortgage Bankers Association.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 was unchanged at 3.07%. Points, including the origination fee for loans with a 20% down payment, decreased to 0.32 from 0.36.
While mortgage rates are hovering near a record low, so many borrowers have already refinanced that demand fell 4% for the week, according to the MBA index, which was seasonally adjusted, including for the Labor Day holiday.
Refinance application volume was 30% higher than a year ago, but that annual comparison has been shrinking for several months.
"With the flurry of refinance activity reported over the past several months, demand may be slowing as remaining borrowers in the market potentially wait for another sizable drop in rates," said Joel Kan, an MBA economist.
Mortgage applications to purchase a home fell 1% for the week but were 6% higher than a year ago. That annual comparison is the smallest since May, dropping from gains in the 20% range the past few weeks.
"Purchase activity has outpaced year-ago levels for 17 consecutive weeks, with stronger growth in loans with higher balances pushing MBA's average loan size to a new survey high of $370,200," Kan said.
The higher loan size is being caused by two factors: Home prices are rising steadily and more higher-priced homes are available for sale. The inventory shortage is most acute on the lower end of the market. Entry-level buyers may also be struggling more in the Covid-19 economy.
Mortgage interest rates moved higher this week, as investors streamed back into the stock market and showed less interest in the bond market. There is not expected to be much reaction to the Federal Reserve's statement scheduled for Wednesday afternoon, as its zero percent policy appears to be baked in for now.