A third consecutive week of falling mortgage interest rates was followed by an increase in mortgage demand.

A seasonally adjusted index released by the Mortgage Bankers Association shows that total application volume increased 7% last week compared to the applications two weeks ago.

For 30-year fixed-rate mortgages with conforming loan balances, the average contract interest rate decreased to 6.2% from 6.23% ($726,200 or less). In addition, for loans with a 20% down payment, points have increased to 0.69 from 0.67 (including the origination fee). One year ago, the rate was about half of what it is now.

The biggest gains were in refinancing applications, up 15% from the previous week. While they were still 77% lower than they were a year ago, the annual gain is now decreasing rapidly.

A 3% increase in mortgage applications was recorded for the week, but this was 39% lower compared to last year. There is a slow trickle back of buyers into the market as prices in the housing market ease a bit. Inventory is still low, however, so there are very few options to choose from.

Joel Kan, an MBA economist, said that house buying activity is tepid, but if rates fall further and prices continue to fall, we expect to see potential buyers return to the market. He added that the affordability challenges have delayed many people’s purchase decisions.

Despite a slight rise in mortgage rates last week, rates are still well below their new lower range. With rates at these levels, some brokerages, such as Redfin, are reporting higher buyer interest. As potential sellers and buyers wait to see where prices go, the housing market seems to be in a holding pattern.