A real estate agent shows a prospective home buyer a house for sale in Peoria, Illinois.

Daniel Acker | Bloomberg | Getty Images

Mortgage demand has been more than muted for the last several weeks, even as rates sit near two-year lows. Mortgage application volume fell 2.4% for the week last week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 34% higher, compared with the same week one year ago, due to this year’s stronger refinance market. The results included an adjustment for the July 4th holiday.

Mortgage rates shifted slightly lower again last week. The average contract interest rate for 30-year, fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.04% from 4.07% , with points increasing to 0.37 from 0.36 (including the origination fee) for loans with a 20% down payment.

Despite the rate drop, mortgage applications to refinance a home loan fell 7% for the week, although they were 88% higher than the same week one year ago, when interest rates were 72 basis points higher.

“Borrowers have been less sensitive to low rates as many borrowers have either recently refinanced or are likely waiting for rates to fall even further,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Other mortgage rates in our survey were unchanged or slightly higher than in the previous week.”

The average contract interest rate for 30-year, fixed-rate mortgages with jumbo loan balances (greater than $484,350) increased to 4.03% from 4.00%.

Mortgage applications to purchase a home increased 2% for the week and were 5.5% higher than the same week one year ago. Buyers are now facing a tighter housing market yet again, as the supply of homes for sale, which had been gaining in the spring, is now dwindling again. Home price gains had been moderating, but they now appear to be heating up again, as more buyers compete for fewer homes.

Mortgage rates began this week slightly higher, following the stronger-than-expected employment report last Friday. Rates could make a stronger move in either direction in the next few days, as Federal Reserve Chairman Jerome Powell testifies before both houses of Congress.

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