For 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less), the average contract interest rate dropped last week from 6.67% to 6.49%.

Although demand for mortgages to buy homes increased by 4% from the previous week, it was 41% lower than during the same week a year ago.

A month ago, mortgage rates were over 7%, but they have since dropped by more than half a percentage point. Nevertheless, the volume of mortgage loan applications fell 0.8% last week compared to the week before, according to the seasonally adjusted index from the Mortgage Bankers Association.

The outcomes also take into account the Thanksgiving holiday’s observance.

For loans with a 20% down payment, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) dropped from 6.67% to 6.49%, and points remained at 0.68 (including the origination fee).

Demand for refinances, which fell 13% from the previous week and was 86% lower than it was in the same week a year ago, remains weak. Strange considering that, according to Black Knight, about 100,000 more current borrowers could now benefit from a refinance as a result of the most recent rate decrease.

Although demand for mortgages to buy homes increased by 4% from the previous week, it was 41% lower than during the same week a year ago. Existing home sales are still declining, but sales of newly constructed homes are increasing as a result of builder concessions, particularly agreements where the builder reduces the mortgage rate.

“Both the domestic and global economies are contracting, which should slow the rate of inflation and enable the Fed to increase interest rates more gradually. After accounting for the Thanksgiving holiday, purchase activity slightly increased, but MBA economist Joel Kan noted that the decline in rates was insufficient to revive refinance activity.

The proportion of applications for adjustable-rate mortgages increased slightly to 9%, down from the 12% to 12% range a month ago when rates were higher. The 30-year fixed rate was close to a record low at the beginning of this year, while the ARM share was only about 3%. The riskier ARMs offer lower interest rates.

Mortgage rates haven’t changed much so far this week, but that may change by the end of the week when the eagerly awaited monthly employment report is scheduled for release. Mortgage rates will be directly impacted by any unanticipated change in either direction.