The Mortgage Bankers Association (MBA) reported its Refinance Index declined to its lowest level since the May 11 week to roughly 4333, or down 6% from last week.

The drop, however, was less than the prior week's 9.2% as lower mortgage rates likely sparked some interest. The contract interest rate for 30-year fixed conforming loans averaged 3.80%, down six basis points, while Federal Housing Administration rates slipped two basis points to 3.60%.

So far in August, refinancing activity has fallen 6% on average from July as mortgage rates are higher by six basis points to a 3.61% average. Some of this will feed into September prepayments (released in October), which are projected to decline close to 10% on average with a four day drop in the number of collection days from August a major influence on the slowing.

Meanwhile, the Purchase Index rose for the second straight week by 1% to 179. Overall, mortgage application activity decreased 4.3%.

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