Mortgage application activity dropped slightly at 0.2 percent in the latest week ending Sept. 26, even though borrowing costs moved lower during the week, according to the Mortgage Bankers Association’s seasonally adjusted mortgage application index.

Broken out, refinance applications dropped 0.3 percent during the week, while applications for home purchases held the same as the previous week. Purchase applications are down 11 percent from year-ago levels and are about 30 percent lower than historical patterns, the MBA reports.

"Although total purchase application volume was little-changed, conventional purchase applications were at the highest level since July," says Michael Fratantoni, chief economist for the MBA. "On the other hand, government application volume fell for the week, with declines in purchase applications for FHA, VA, and Rural Housing Service loans."

The 30-year fixed-rate mortgage dropped from 4.39 percent to an average of 4.33 percent during the week, the MBA reports.

Since then, mortgage rates started to move slightly higher Tuesday and could be volatile by the end of this week, and the jump in rates could be bigger than those seen over the last few weeks, wrote Matthew Graham of Mortgage News Daily. That has prompted some loan originators to urge potential borrowers to lock in rates now if their closing is within 30 days.

Source: CNBC