A volatile economy continued to affect the U.S. mortgage market this week, causing mortgage demand and interest rates to plummet.

According to the Mortgage Bankers Association’s index, home loan application volume decreased by 20.3 percent to a a seasonally adjusted index reading of 379.9 during the week ended Oct. 31.

Both refinance and home purchase loan requests were lower in the latest week, with the MBA’s refinance index falling 27.8 percent o 1075.4 and the purchase index sinking 13.9 percent to 260.9.

Refinances made up only 42.9 percent of all mortgage requests, compared with 46.9 percent the previous week.

During the roughly the same time, interest rates on long and short term home loans fell as well, according to Freddie Mac Thursday.

“Mortgage rates fell this week amid new indications of a pullback in consumer spending and a weaker jobs market,” said Freddie Mac vice president and chief economist Frank Nothaft.

The average rate on a 30-year fixed rate mortgage decreased to 6.20 percent, excluding fees, from 6.46 percent the week before. One year ago, the average rate was 6.24 percent.

Rates on 15-year fixed rate loans dropped to 5.88 percent from 6.19 percent. At this time last year, 15-year mortgages averaged a rate of 5.90.

One-year adjustable rate mortgages carried an average rate of 5.25 percent, down from 5.38 percent one week earlier. Last year, the average rate was 5.50 percent.

According to Nothaft, tighter lending standards are having the biggest impact on demand and rates.

“With the economy contracting and experiencing record home foreclosures, lenders tightened their credit standards further, according to the October Federal Reserve Senior Loan Officer survey,” he said. “Approximately 70 percent of banks raised their lending standards for prime mortgages and about 90 percent of banks that offer nontraditional mortgages did so as well.”