After a sharp rise, mortgage interest rates stepped back a bit last week, but that did nothing to juice borrower demand.

Total mortgage application volume decreased 2.9 percent for the week, seasonally adjusted, according to the Mortgage Bankers Association. That marked the sixth straight week of losses. Volume was 10 percent lower compared with the same week one year ago.

Refinance volume, which is most rate sensitive and usually rises when rates fall, did just the opposite.

Applications to refinance a home loan fell 5 percent for the week to the lowest level since December 2000. Volume was nearly 27 percent lower than a year ago, when rates were lower. The refinance share of total mortgage application volume fell to its lowest level since August, 2008, at just 35.3 percent.

The weekly drop in interest rates was likely not enough to get borrowers to start the often tedious refinance process. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.84 percent from 4.86 percent, with points decreasing to 0.47 from 0.52 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

"Rates slipped slightly over the week as concerns over U.S. trade policy and global growth sent some investors back to safer U.S. Treasurys. Minutes from the most recent FOMC meeting also yielded a more dovish tone, which added to the downward pressure in rates," said Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association.

Mortgage applications to purchase a home fell 2 percent for the week but were 2 percent higher compared with a year ago. Homebuyers today are less worried about interest rates and more concerned with weak supply and high prices. Affordability is weakening, especially at the lower end of the market, where demand is highest and supply is leanest.

Mortgage rates moved even lower to start this week, as a sell-off in the stock market caused a run on bonds. Political uncertainty in Italy unnerved global markets. Over the weekend Italy's president stopped the formation of a coalition government that may have sought to leave the euro. That had investors worried about the strength of the euro zone.

The U.S. 10-year Treasury yield, which mortgage rates loosely follow, fell to the lowest level since the start of April. Mortgage rates dropped as well, but the trajectory appears to still be higher.

"The things that were causing upward pressure on rates haven't changed," said Matthew Graham, chief operating officer at Mortgage News Daily. "It's a big 'if' to entertain the possibility that an Italian EU exit could overshadow all the headwinds for interest rates, even though it hits big in terms of shorter-term drama."