Sidelined home buyers holding their breath for lower mortgage rates might need to wait just a little more before they can exhale. Mortgage rates dropped slightly ahead of this week’s Federal Reserve meeting, as financial markets assessed the future U.S. economy and the central bank’s willingness to cut the benchmark federal-funds rate.

Mortgage demand fell to the lowest level since May, even as mortgage interest rates haven't moved at all. Consumers are concerned about the broader economy.