Key takeaways: 

• The average agreement interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) fell to 5.49% from 5.53%
• Mortgage applications to buy a house dropped 12% week to week and were 15% lower than the same week one year back.
• Applications to refinance a home loan resumed their landslide, losing another 10% week to week.

Mortgage rates dropped the previous week slightly, but housing affordability has already been damaged.

According to the Mortgage Bankers Association's seasonally adjusted index, refinance and buy loan demand fell, pulling the entire mortgage application volume down 11% for the week.

Mortgage applications to buy a home plunged 12% week to week and were 15% lower than the same week one year back. That was the first weekly decline in homebuyer demand since the third week in April. Mortgage rates have increased over two total percentage points since the beginning of the year, and home costs are up almost 20% from a year back.

The average agreement interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) fell to 5.49% from 5.53%, with points rising to 0.74 from 0.73 (including the origination fee) for loans with a 20% down payment.

Inflation isn't allowing customers to feel entirely flush either.