Slight drop in mortgage rates didn’t stop the bleeding in refinances

Higher mortgage rates are hitting the refinance market hard and may finally be taking their toll on homebuyers.

Mortgage application volume fell 2.2% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) did fall slightly to 3.33% from 3.36%, with points decreasing to 0.39 from 0.42 (including the origination fee) for loans with a 20% down payment. The rate, however, had been rising for seven straight weeks and is now significantly higher than at the start of this year.

As a result, applications to refinance a…