Mortgage applications dropped for the second week in a row due to continuous market uncertainties and limited housing supply. It was a fall of 0.5% from the week prior, according to the Mortgage Bankers Association.

The refinance index decreased as well, going down 2% for the week ending June 29 from the previous week. The refinance share of application activity also decreased, going to 37.2% from 37.6%.

"Financial market volatility in response to continued worries about trade resulted in both lower mortgage rates and a drop in applications last week. The refinance index dropped below 1000 again last week, one of the weakest readings in the last 20 years," said MBA Chief Economist Mike Fratantoni.

Despite mortgage application activity falling, purchase applications rose. The seasonally adjusted purchase index increased by 1% from one week earlier, while the unadjusted purchase index held constant and was 1% lower at this point a year ago.

Mortgage apps fall

Fratantoni points out a decline in applications for conventional purchase loans led to falling below last year's level. "A shortage of inventory remains a significant constraint, but it is interesting to note that applications for government purchase loans fared better on the week, indicating that first-time buyers remain in the market," he said.

Adjustable-rate loan activity increased to 6.7% from 6.5% of total applications.

The share of applications for Federal Housing Administration-guaranteed loans, Veterans Affairs-guaranteed loans and U.S. Department of Agriculture/Rural Development all remained unchanged at 10.2%, 10.7% and 0.8%, respectively.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.79% from 4.84%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100), the average contract rate increased to 4.71% from 4.70%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA dropped to 4.78% from 4.81%. The average for 15-year fixed-rate mortgages also declined to 4.22% from 4.29%.

The average contract interest rate for 5/1 ARMs grew 2 basis points to 4.03%.