Mortgage Bankers Association said in a report on Wednesday.

Demand for home mortgage dropped to a seasonally adjusted 2.8 percent in the week ended September 25 as affected by the 6.2 percent drop in demand for purchase loans and a 0.8 percent reduction in refinancing.

Borrowing costs almost reached record lows, with average 30-year rates falling 0.03 percentage point to 4.94 percent.

The 30-year fixed mortgage rates were at their the lowest since the week ended May 22, at 4.81 percent, after hitting an all-time low of 4.61 percent in March, according to the industry group.

Last year, 30-year rates averaged 6.33 percent.

Low mortgage rates, high affordability, and the government's stimulus package with an $8,000 tax credit for first-time home buyers have helped stabilize the market.