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Mortgage demand is now heavily skewed toward refinancing, as interest rates declined for the fifth straight week.

Total mortgage application volume rose just 1.6% last week, compared with the previous week, 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 6.43% from 6.44%, with points increasing to 0.56 from 0.54 (including the origination fee) for loans with a 20% down payment. The rate was 78 basis points higher than the same week one year ago.

Applications to refinance a home loan fell 0.3% for the week but were 94% higher than a year ago. That might seem like a massive increase, but it is coming off a very low number. Still, it is the one bright spot in a business that fell off a cliff due to higher interest rates and very weak homebuying.

Applications for a mortgage to purchase a home rose 3% for the week but are still 4% lower than the same week a year ago. Home sales have been very slow all summer, as buyers face sky-high home prices; the drop in interest rates hasn't been enough to get them off the fence.

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