Total mortgage application volume fell 5% from the previous week, according to the Mortgage Bankers Association.

Volume was 65% higher than a year ago, when interest rates were considerably higher.

Refinance volume was weakest, falling 7% last week, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey.

"Mortgage rates were mostly unchanged, even as a potential trade deal between the U.S. and China caused rates to inch forward at the end of last week," said Mike Fratantoni, MBA Senior Vice President and Chief Economist.

"With rates showing little meaningful movement, both refinance and purchase activity took a step back. As we move into the slowest time of the year for home sales, purchase application volume is declining but continues to outperform year-ago levels, when rates were much higher. Purchase activity was 10 percent higher than a year ago."

Added Fratantoni, "2019 was another year of inadequate housing supply in relation to demand. The good news is that the tide could be slowly turning for potential buyers. Housing starts and permits rose strongly in November, and homebuilder confidence has surged to a level not seen since 1999."

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) remained unchanged at 3.98 percent.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.40 percent from 3.37 percent.