Mortgage rates last week dropped to the lowest level since April، but buyers are still struggling to afford today’s housing market. As a result، mortgage demand flattened at a weak pace. Total mortgage application volume inched up just 0.5% from one week earlier، 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) decreased to 7.08% from 7.18%، with points decreasing to 0.63 from 0.65 (including the origination fee) for loans with a 20% down payment.

Boost to refinance applications

Applications to refinance a home loan، which are most sensitive to weekly rate changes، increased 5% for the week and were 7% higher than the same week one year ago.

“Treasury yields continued to move lower last week and mortgage rates declined for the second week in a row،” said Joel Kan، MBA’s vice president and deputy chief economist. “The decline in rates led to a small boost to refinance applications، including another strong week for VA refinances. However، the overall level of refinance activity remains low.”

Applications for a mortgage to purchase a home fell 2% for the week and were 14% lower than the year-earlier period. The drop was driven by a 9% decline in FHA applications. Those loans are favored by first-time or lower income buyers because they allow much smaller down payments than conventional loans.

“While the downward move in rates benefits prospective homebuyers، mortgage rates are still much higher than they were a year ago، while for-sale inventory remains tight،” Kan added.