Mortgage loan applications dropped slightly in the last week of May, the fourth straight weekly decline, while another index used to measure refinancing dropped to its lowest level in two years.

The Mortgage Bankers Association, a trade group, said loan applications in the week ended May 28 dropped 1.2% from the week before, and were down 55% from the same period a week before, when the 30-year fixed rate was at its record low of 5.14%.

Refinancing dropped to 34.3% of all applications from 36.2% the week before, and adjustable-rate applications also declined to 33.9% of all applications from 34.6% the week before. Adjustable-rate applications reached their highest levels since 1995 in the middle of May, as buyers flocked to lower rates ahead of a widely anticipated

Fed

rate hike in late June.

However, a three-week drop in 10-year Treasury yields also pushed long-term mortgage rates down for the third week in a row. The yield went from its recent peak of 4.80% on May 12 to 4.66% on May 28, and rates moved in lockstep, said Robert Barbera, chief economist at Hoenig Research.

The national average rate for a 30-year mortgage dropped to 6.24% from 6.26% the week before, the MBA said. Also, 15-year fixed-rate mortgages dropped to 5.59% from 5.63% the week before. The average for a one-year adjustable rate mortgage went down to 3.85% from 3.86% the week before, the group reported.

Barbera said the drop in refinancing indicated an improved economy. Although refinancing has dropped 84% since the start of the year, he pointed out that homeowners had nearly a year to get very low refinancing rates.

"If rates stay where they are or go 50- to 75-basis points higher, you would expect refinancing to plunge," he said. "But gangbuster rates of refinancing are an indication of economic sickness, not economic health."