The July 4th holiday retarded mortgage application volume, sending the Mortgage Bankers Association's Market Composite Index down 24%, or 5.1% on a seasonally adjusted basis, from a week earlier, the MBA said Wednesday. Rates declined.

Unadjusted, the Purchase Index fell 21.9%, but seasonally adjusted, it was down only 2.6% from the previous week. The unadjusted Purchase Index was 0.2% percent lower than the same week a year earlier; the Refinance Index decreased 6.2% from the previous week and was 42.1% a year ago. The Refinance Index was not seasonally adjusted but was adjusted for the holiday.

The four week moving average for the seasonally adjusted Market Index was down 4.7%. The four week moving average was down 1.0% for the seasonally adjusted Purchase Index and down 6.3% for the Refinance Index.

The refinance share of mortgage activity decreased to 65.6% of total applications from 66.4% the previous week. The adjustable-rate mortgage(ARM) share of activity decreased to 5.5% from 6.1%.

The average contract interest rate for 30-year fixed-rate mortgages fell to 4.55% from 4.69%, with points increasing to 0.99 from 0.90. The average rate for 15-year fixed-rate mortgages decreased to 3.68% from 3.79%, with points increasing to 1.10 from 0.88.

David Goldberg, home building analyst at UBS, said in a note to investors that the Purchase Index "has been range bound at historically low levels for most of this year. We believe this reflects the impact of: 1) tighter underwriting standards, which is reducing the pool of potential buyers; and 2) weak buyer confidence around home prices."