As consumers worry more about inflation, fewer are buying homes — and if they are, they’re buying less expensive homes. Mortgage demand fell last week compared with the previous week, and the average loan size shrank as well.

Mortgage applications to purchase a home fell 4% for the week and were 18% lower than the same week one year ago, according to the Mortgage Bankers Association’s seasonally adjusted index. The MBA also included an adjustment for the July Fourth holiday.

Buyers have been pulling back due, in part, to higher mortgage rates, but rates held steady last week. The average contract interest rate for 30-year fixed mortgages with conforming loan balances ($647,200 or less) remained at 5.74%, with points decreasing to 0.59 from 0.65 (including the origination fee) for loans with a 20% down payment.

“Purchase applications for both conventional and government loans continue to be weaker due to the combination of much higher mortgage rates and the worsening economic outlook,” said Joel Kan, an MBA economist. “After reaching a record $460,000 in March 2022, the average purchase loan size was $415,000 last week, pulled lower by the potential moderation of home-price growth and weaker purchase activity at the upper end of the market.”

Applications to refinance a home loan, which have been incredibly weak due to higher interest rates, rose 2% for the week but were 80% lower than the same week one year ago. At the same time last year, the average mortgage rate was 3.09%. There are very few remaining borrowers who don’t already have lower rates on their mortgages and who could benefit from a refinance.