Mortgage demand drops to its lowest level since July, as interest rates return to summer highs

Mortgage demand moved lower again last week, even though mortgage interest rates didn't move.

Total mortgage application volume dropped 6.7% from the previous week, hitting its lowest level since July, 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 ($766,550 or less) remained unchanged at 6.52%, with points decreasing to 0.64 from 0.65 (including the origination fee) for loans with a 20% down payment.

Refinance demand continued to lead the way down, dropping 8% for the week. It was, however, 90% lower than the same week one year ago. Last year at this time mortgage rates were 138 basis points higher, closing in on 8%.

Applications for a mortgage to purchase a home were 5% lower for the week and just 3% higher than the same week one year ago. Potential home buyers have a much better interest rate environment now than they did a year ago, but home prices are now higher. Some real estate agents say buyers are also taking a wait and see approach before next month's presidential election.

"For-sale inventory has started to loosen, and home-price growth has eased in some markets, providing more options for buyers in combination with these lower rates." said Joel Kan, an MBA economist in a release.

Some real estate agents, though, say potential buyers are taking a wait and see approach before next month's presidential election.

Mortgage rates began this week sharply higher, with the average on the 30-year fixed jumping 14 basis points Monday to the highest level since July, according to a separate survey from Mortgage News Daily. They continued slightly higher again on Tuesday.

"Underlying market movement wasn't readily attributable to any singular headline or economic report," wrote Matthew Graham, COO of Mortgage News Daily. "Leading theories involve changes in election odds and more esoteric aspects of the bond market's plumbing."