U.S. mortgage applications fell for a second consecutive week, led by a decline in demand for home purchase loans as interest rates reached new multiyear highs, an industry trade group said Wednesday.

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The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ended April 14 fell 1.7 percent to 569.6 from the previous week's 579.4.

"Even if interest rates weren't rising, home prices are very high relative to income," said Celia Chen, director of housing economics at Moody's Economy.com, a consulting firm. "So, people are getting priced out and rising mortgage rates are making it worse."

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.56 percent, up 0.06 percentage point from the previous week. That was the highest level since the week ended June 7, 2002, when it reached 6.65 percent.

The 30-year fixed-rate mortgage, the industry benchmark, is also above last year's high of 6.33 percent, reached in the week of Nov. 11 after climbing on and off from a 2005 low of 5.47 percent in June.

The MBA's seasonally adjusted purchase index fell 2.7 percent to 407.4 from the previous week's 417.7. The index — widely considered a timely gauge of U.S. home sales — was also below its year-ago level of 466.7.

The group's seasonally adjusted index of refinancing applications slipped 0.4 percent to 1,526.1, compared with 1,532.4 the previous week. A year earlier, the index stood at 1,870.0.

The refinance share of mortgage activity rose to 36.4 percent of all applications from 36.0 percent.

Fixed 15-year mortgage rates averaged 6.19 percent last week, up from 6.17 percent. Rates on one-year adjustable-rate mortgages rose to 6.00 percent from 5.97 percent.

ARMs have been a refuge for cash-strapped consumers seeking to buy a home with low initial mortgage payments. Both fixed- and floating-rate loans have been rising steadily, which likely played a role in last week's drop in applications, said Chen.

However, rates on ARMs have been rising less than those on fixed-rate loans, and the ARM share of applications rose to 28.9 percent of all applications from 28.6 percent a week ago.

ARM demand reached a 2005 high of 36.6 percent in late March.

SIGNS OF COOLING IN HOUSING MARKET

Historically low mortgage rates have fueled a five-year housing boom, helping support the U.S. economy's recovery from recession despite uncertain business investment.

"Despite increased talk about rising interest rates, mortgage rates are still at the bottom of the 15-year range," said Bob Walters, chief economist at Quicken Loans. "Thirty-year fixed mortgage rates below 7 percent still drive new home purchases as well as refinance activity."

Analysts differ on whether or not there is a housing bubble, but most agree the market is cooling off.

The MBA's soft data followed other reports this week that showed cooling in the U.S. housing sector. The Commerce Department said the pace of housing construction slowed in March and the National Association of Home Builders said its index of home builder sentiment fell for a fourth consecutive month in April to the lowest since November 2001.

The MBA's survey covers about 50 percent of all U.S. retail residential mortgage originations. Respondents include mortgage bankers, commercial banks and thrifts.

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