Mortgage demand drops to lowest level since May, as interest rates stall

• The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, decreased to 6.83% from 6.84%.
• Applications for a mortgage to purchase a home dropped 6% for the week and were 17% higher than the same week one year ago.
• Applications to refinance a home loan fell 1% for the week and were 30% higher the same week one year ago.

Mortgage interest rates have barely moved in several weeks, but rates are not what is weighing on consumers most. It's really uncertainty about the economy that worries people more. That is keeping some from making big financial decisions.

As a result, total mortgage application volume dropped 3.8% last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, $806,500 or less, decreased to 6.83% from 6.84%, with points decreasing to 0.60 from 0.62, including the origination fee, for loans with a 20% down payment.

“Mortgage applications fell to their lowest level since May, with both purchase and refinance activity declining over the week,” said Joel Kan, MBA's vice president and deputy chief economist. “There is still plenty of uncertainty surrounding the economy and job market, which is weighing on prospective homebuyers' decisions.”

Applications for a mortgage to purchase a home dropped 6% for the week and were 17% higher than the same week one year ago. Volume, however, is so low that the annual comparison is skewing deceptively high.

“Applications for conventional, FHA, and VA purchase loans fell, despite slowing home-price growth and increasing levels of for-sale inventory in many regions,” said Kan.

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Applications to refinance a home loan fell 1% for the week and were 30% higher the same week one year ago. Overall refinance volume is also historically low. That is the third straight week of declines in refinancing. Last year, mortgage rates were just one basis point lower, so essentially the same.

Mortgage rates fell very slightly to start this week, but could see a bigger change in either direction following the Federal Reserve's announcement on interest rates Wednesday and Chairman Powell's commentary. The next big driver will be Friday's release of the government's monthly employment report.