Mortgage demand continues to drop, as rates have begun increasing again, and housing sales have begun to decline due to a lack of listings.

According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume fell 6.5% from a week prior, reaching the lowest level in 22 years.

For 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less), the average contract interest rate increased from 5.33% to 5.40%, with points (including origination fee) rising from 0.51 to 0.60 for loans with a 20% down payment.

Most sensitive to weekly rate moves, refinance demand was down 6% for the week, and 75% from a year prior. Most mortgage holders right now enjoy rates far below the current one, and those who want to pull cash out of their homes are using second mortgages, rather then refinancing their existing liens.

Joel Kan, an MBA economist said, “While rates were still lower than they were four weeks ago, they remained high enough to still suppress refinance activity. Only government refinances saw a slight increase last week. The purchase market has suffered from persistently low housing inventory and the jump in mortgage rates over the past two months. These worsening affordability challenges have been particularly hard on prospective first-time buyers”

Mortgage applications to purchase a home were down 7% for the week, and 21% lower from a year prior.

According to a survey by Mortgage News Daily, mortgage rates have already begun to move up even farther this week. Rates had been fairly stable for several weeks, following a period of rapid rise over the previous months.

Matthew Graham, chief operating officer at Mortgage News Daily noted, “There’s some chance that the upper boundaries of that range end up being a ceiling for rates, but that will depend on inflation and other incoming economic data. With a key inflation report set to release on Friday morning, the potential for volatility remains high.”