Homebuyer mortgage demand decreases despite interest rates returning to April lows.

Despite mortgage rates dropping to their lowest level since April, buyers are still facing difficulties in affording the current housing market. Consequently, mortgage demand has flattened at a weak pace. According to the Mortgage Bankers Association's seasonally adjusted index, total mortgage application volume increased by only 0.5% from the previous week.

The interest rate for 30-year fixed-rate mortgages with conforming loan balances 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.

The number of applications to refinance a home loan rose by 5% this week, compared to a 7% increase from the same week last year.

"Last week, Treasury yields moved lower and mortgage rates decreased for the second consecutive week, according to Joel Kan, MBA's vice president and deputy chief economist. The decline in rates led to a slight increase in refinance applications, particularly for VA loans. Despite this, the overall level of refinance activity remains low."

The number of mortgage applications for purchasing a home decreased by 2% during the week and was 14% lower than the previous year. This decline was caused by a 9% drop in FHA loan applications. FHA loans are popular among first-time or low-income buyers because they require smaller down payments than conventional loans.

Although the decline in rates is advantageous for potential homebuyers, mortgage rates are still significantly higher than they were a year ago, and the inventory of homes for sale remains limited, according to Kan.

This week, mortgage rates decreased slightly. However, the focus has shifted to the monthly consumer price index report, which will be released on Wednesday. This report will provide another insight into inflation, which will influence the Federal Reserve's next move on interest rates.

"Matthew Graham, chief operating office of Mortgage News Daily, wrote that forecasts are clear for a 0.3% increase in core prices, month over month. The difference between a 0.2 or 0.4 result is significant when it comes to interest rates. A 0.1 or 0.5 result could result in a large rate jump or drop in months."