Low mortgage rates are beginning to strain the refinance market after most buyers who qualify have already gone through the process. According to a new report on Wednesday by the Mortgage Bankers Association, applications to refinance dropped 4% this week.

Mortgage rates struck a new low last year during the COVID-19 pandemic. The main reason appears to be the continued low interest rates maintained by the Federal Reserve as part of its measures to stimulate the economy.

Last week, Jerome Powell, the chairman of the Federal Reserve, signaled that his institution may move in the direction of cutting its stimulus programs, but that long-term interest rates were unlikely to change.

According to the MBA report, the average contract interest rate for 30-year, fixed-rate mortgages with conforming loan balances ($548,250 or less) remains unchanged from last week.

Applications for a mortgage saw a 1% rise, but they are still 16% lower than they were at the same time last year. Affordability plays a part alongside interest rates in keeping these rates down.

Joel Kan, MBA’s associate vice president of economic and industry forecasting, told CNBC that any gains in mortgage applications have been focused more around a higher tier of the market.

Like other sectors of the economy, the housing market is struggling with a supply and demand problem. Inventory shortages across the board have pushed up prices as demand has continued to remain strong amid a steady economic recovery.

Just last week, there was a slight uptick in sales to more first-time buyers looking for lower-priced homes, pushed up by for-sale inventory for newly built homes and existing homes, according to the MBA’s Kan. That report followed a streak of strong home sales in July, which broke a string of muddling performances in the three months prior.

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