A reading of raw mortgage application volume plummeted a seasonally-adjusted 38.8 percent for the week ending Jan. 23, according to a weekly survey released Wednesday by the Mortgage Bankers Association. Refinance applications continued to edge back from recent highs, outstripping the overall index's decline by plunging 48 percent the same week. The refi share of all mortgage applications declined to 72.8 percent from 83.3 percent the previous week. Conventional purchase applications slipped 7.8 percent, while government purchase apps -- largely FHA demand -- increased 8.8 percent, according to the MBA's data. The four-week moving average of raw application volume declined 10.5 percent, showing an overall weakening of the application market. The trend might be a continuation of the market's reaction to mortgage rates inching upward past the 5 percent mark last week. As rates edge upward once more, the popularity of refinance options wanes while the demand for first time purchases eases. A separate survey conducted by Mortgage Maxx LLC -- which adjusts raw application volume to count multiple submissions by a single household as one entry -- showed household activity slipped 4.9 percent on a seasonally-adjusted basis for the week ending Jan. 23. The MAXcal, which isolates the local Californian application market, showed a 10.7 decline in household activity in the state; it had increased 15.6 percent the previous week. Paul Descloux, the publisher of the Mortgage Application Index (the MAX), in his commentary on the index said the steady drying up of household activity suggests "history may be repeating itself despite the Fed[eral Reserve]'s best laid plans" to spark lending by lowering the federal funds rate effectively to zero percent. "The pace of mortgage activity peaked this past week as mortgage rates moved noticeably higher," Descloux wrote. "Application demand responded strongly from extreme weakness as sub-five percent mortgages were available -- at least in perception. The question now is how many of those applications can make it through the origination gauntlet." The Federal Open Market Committee on Wednesday will conclude two days of meetings and is expected to release its decision in the early afternoon. Although the federal funds rate has already been lowered effectively to zero -- standing at a rate of zero to 0.25 percent -- with minimal change to mortgage interest rates, the FOMC may have to get creative with its credit-easing strategies if the housing market is to feel any long-lasting effect. Visit www.mbaa.org or www.mortgagemaxx.us for further details. Write to Diana Golobay at diana.golobay@housingwire.com.