A brief roller coaster ride for mortgage rates caused yet another swing in demand. After dropping to a three-year low two weeks ago, rates then shot right back up again.

As a result, total mortgage application volume dropped 12.7% last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. The drop was mostly driven by a pullback in refinancing.

Applications to refinance a home loan fell 21% for the week and were 16% higher than the same week one year ago. This, even though mortgage rates were 32 basis points higher last week than the year before. The refinance share of mortgage activity decreased to 55% of total applications from 60% the previous week.

The average contract interest rate for 30-year fixed-rate mortgages with conf

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