It's almost as if falling mortgage rates are becoming hum-drum, at least for homebuyers.

Total mortgage application volume increased 1.3% last week from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. Volume was 40% higher than a year ago, largely because lower mortgage rates are strengthening the refinance market.

Rates have fallen in three of the last four weeks and are now at the lowest level since September 2017. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.06% from 4.14%, with points decreasing to 0.35 from 0.38 (including the origination fee) for loans with a 20% down payment. That is 78 basis points lower than a year earlier.

"Markets last week reacted to a more dovish FOMC statement and forecast, with Treasury yields falling after the meeting," said Joel Kan, MBA's associate vice president of economic and industry forecasting. "Mortgage rates dropped again for most loan types, which led to an increase in refinance activity, partly driven by a 9% jump in VA applications."

The drop spurred more refinance activity, with those applications rising 3% for the week and a striking 92% annually. As home values continue to rise, more borrowers become eligible to refinance, and so each drop in rates brings out more business for lenders.

Mortgage applications to purchase a home, however, fell 1% for the week but were 9% higher than a year earlier. Buyers are less sensitive to weekly rate moves. Existing home sales did move slightly higher in May from April, as rates fell, but they were still lower than a year ago. Buyers continue to face high prices and low supply of affordable homes.

"Now at almost the halfway mark of 2019, we have generally seen a stronger purchase market than last year, despite still-tight existing inventory and insufficient new construction," Kan said.

Sales of newly built homes fell unexpectedly sharply in May, despite lower mortgage rates. Affordability appeared to be the culprit, although some blamed the drop in weaker consumer sentiment in the overall economy.