An index of U.S. home builder sentiment fell in December to its lowest since April 2003, the National Association of Home Builders said on Monday. It cited rising mortgage rates and softening demand.

The NAHB/Wells Fargo Housing Market index slid to 57 in December, seasonally adjusted, from November's revised 61. The reading was the lowest since April 2003, when it was 55.

"Many builders sense some tapering off of single-family buyer demand, but remain reasonably confident in the ongoing strength of their markets," NAHB President Dave Wilson, a custom home builder from Ketchum, Idaho, said.

"They obviously are reacting to higher interest rates and energy costs, along with some buyer resistance to high house prices," he said in a press release.

It was the first time since 2000 that the index ended the year lower than where it stood at the beginning of the year.

The confidence level, however, remains above the midpoint that indicates the majority of builders still see conditions as positive in their markets, the NAHB said.

Readings above 50 indicate more builders view their market conditions as favorable, rather than poor.

The NAHB's index for current sales of new homes fell to 63 in December, down from 67 in November, the group reported.

The index measuring builder sentiment over the next six months held steady at 65 while the group's potential buyer traffic index decreased to 39 in December from 46 in November.

"As expected, the housing market appears to be coming off the recent record pace of home sales," NAHB Chief Economist David Seiders said in the press release.

Mortgage rates have been on the rise.

In its latest weekly survey, mortgage finance company Freddie Mac (FRE) said interest rates on 30-year mortgages averaged 6.30 percent. While this was down from the 6.32 percent registered during the previous week, rates are still hovering close to their highest levels in over a year.

Rising mortgage rates have dampened demand for new mortgage applications.

In its most recent survey, the Mortgage Bankers Association, an industry trade group, said U.S. mortgage applications fell last week, dragged down by home refinancings slumping to a 17-month low.

The MBA said its seasonally adjusted index of mortgage application activity for the week ended Dec. 9 dropped 5.7 percent to 619.3 from the previous week's 656.7.

That drop could be a sign that the broader U.S. housing market, which has been an engine of economic expansion, is beginning to sputter. The slowdown could dampen consumer spending and ripple through financial markets.

Further insight into the strength of the housing market will emerge on Tuesday when the Commerce Department releases data on housing starts in November and on Wednesday the Mortgage Bankers Association will release its latest report on mortgage applications.