Application volume decreased 3.4% from one week earlier, according to the Mortgage Bankers Association.
At the same time, housing demand unexpectedly weakened for a second month as lean inventory took a toll on affordability, putting a damper on the typically busier spring selling season, the National Association of Realtors reported.
The MBA's Weekly Mortgage Applications Survey for the week ending May 26 found that the refinance index decreased 6% from the previous week.
The refinance share of mortgage activity decreased to 43.2% of total applications from 43.9% the previous week.
The seasonally adjusted purchase index decreased 1% from one week earlier, while the unadjusted purchase index decreased 3% compared with the previous week and was 7% higher than the same week one year ago.
Adjustable-rate mortgage applications decreased 5 basis points to 7.7%, while the Federal Housing Administration share decreased 3 basis points to 10.5%.
The VA share increased 3 basis points to 10.8% and the USDA share remained unchanged at 0.8%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.17%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100), the average contract remained unchanged at 4.11%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 4.03% from 4.07%, while for 15-year fixed-rate mortgages, the average decreased to 3.42% from 3.45%.
The average contract interest rate for 5/1 ARMs decreased to 3.22% from 3.27%.