Will the housing market still have hope if – even with low mortgage rates – mortgage applications for home loan refinancing remain down?

For the second straight week, mortgage applications for home loan refinancing declined. And this time, the numbers reached its lowest level since August. Historically, low mortgage rates equate to a boost in the housing market; now, though, it has failed to raise demand for loans to purchase homes.

Last Wednesday, the Mortgage Bankers Association revealed an 8.9% decrease in their seasonally adjusted index of mortgage applications for the week ending September 10; seasonally adjusted index of mortgage applications include both refinance and purchase loans. Even the 4-week moving average of mortgage applications that smoothens the erratic weekly figures is down by 0.8%. MBA’s seasonally adjusted index of refinancing applications also reached its lowest level since week ending August 6, with a decrease of 10.8%.

Home loan refinancing is supposed to be a viable option for homeowners, as It gives them extra cash to pay off existing debt, to save, or to buy. But, as New York’s Deutsche Bank senior economist Torsten Slok said, homeowners have been bothered by ‘underwater’ mortgages and therefore unable to refinance. There is a high possibility that those who are qualified to refinance lost their jobs.

Being an innocent bystander in today’s weak labor market, housing may see a flat line in home prices until 2012. It continues to struggle with the expiration of the home buyer tax credit last April 30.

Excluding fees, 30-year fixed-rate mortgage borrowing costs saw an average of 4.47%, 0.03% less than last week’s. This is but 0.04% above the lowest level since the survey, which has been conducted weekly since 1990. Interest rates are also lower than last year’s 5.08%.

But home sales may continue to decline, as MBA’s seasonally adjusted purchase index – which is an early indicator of home sales – drops for the first time in four weeks by 0.4%. The fixed 15-year mortgage rates have a 3.96% average, 0.04% down from the previous week’s. One-year adjustable-rate mortgage also decreased from 7% to 6.89%.

Milford, Connecticut’s Total Mortgage president John Walsh says people should start taking advantage of these low mortgage rates. After all, they may never come again.