The MBA's Market Composite Index, a measure of weekly application activity based on surveys of the trade group's members, fell a seasonally adjusted 5.7% for the period ending May 24. The dropoff came as mortgage rates also saw their first uptick in four weeks and followed a rise in activity of 1.9% seven days earlier. On a year-over-year basis, volumes were 3.6% lower. 

"Both purchase and refinance applications fell, pushing overall activity to the lowest level

since early March," said Joel Kan, MBA vice president and deputy chief economist, in a press release.  

The conforming 30-year fixed-contract rate for mortgages with balances eligible for sale to the government-sponsored enterprises edged up 4 basis points to 7.05 from 7.01% among MBA lenders last week. Meanwhile, borrower points used to help buy down the rate climbed up to 0.63 from 0.6 for 80% loan-to-value ratio applications.

"Borrowers remain sensitive to small increases in rates, impacting the refinance market and keeping purchase applications below last year's levels," Kan added.

Similarly, after three straight weeks of elevated activity, particularly for government-backed transactions, the Refinance Index saw a 13.6% tumble from the prior survey. But the index still ended up higher by 12.4% compared to subdued levels of one year earlier. 

The steep pullback in refinances led their share in volume relative to overall activity to also shrink to 31.3% compared to 34% the previous week.

The seasonally adjusted Purchase Index took a more muted 1.1% fall, but still ended up lower for the third week in a row. On a year-over-year basis, purchase-application volumes decreased 10.4%, as housing market trends stymie would-be buyers.

"There continues to be limited levels of existing homes for sale, and many buyers are struggling to find listings in their price range that meet their needs," Kan said. The MBA's latest data correlates with recent trends reported by the National Association of Realtors, which said existing-home sales declined for the second straight month in April.

A retreat among borrowers in the federally sponsored lending market noticeably drove overall activity downward during the seven-day period. The seasonally adjusted Government Index dropped 12.4%, fueled by a significant plunge in Department of Veterans Affairs-backed refinance loans, MBA found.

The percentage of federally guaranteed loan volume also diminished in tandem, with VA-sponsored loans narrowing to a 12% share from 13.7% in the previous survey. Federal Housing Administration-backed applications edged back to 12.7% from 12.8%. The small slice of mortgages coming from U.S. Department of Agriculture programs grew to 0.4% from 0.3% week over week. 

Average mortgage rates among MBA members finished higher across the board to end last week. Like the conforming rate, the mean contract average of the 30-year jumbo loan also increased 4 basis points to 7.22% from 7.18% seven days earlier. Borrowers typically took 0.43 in points, down from 0.44. 

The 30-year FHA-backed mortgage came in at an average fixed rate of 6.85% rising from 6.77% in the prior survey period. Points climbed up to 0.95 from 0.88 the previous week for 80% LTV-ratio loans.