U.S. mortgage applications fell slightly last week, led by a decline in home refinancing loans as interest rates hit their highest in four years, an industry trade group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended June 16 decreased 0.8 percent to 567.6 from the previous week's 571.9.

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Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.73 percent, up 0.12 percentage point from the previous week, its highest level since May 10, 2002 when it reached 6.76 percent.

The MBA's seasonally adjusted purchase mortgage index rose 0.1 percent to 414.8.

However, the purchase index, which is considered a timely gauge of U.S. home sales, was substantially below its year-ago level of 479.4.

The group's seasonally adjusted index of refinancing applications decreased 2.2 percent to 1,466.1. A year earlier the index stood at 2,575.0.

The refinance share of applications decreased to 35.5 percent from 35.7 percent the previous week.

Fixed 15-year mortgage rates averaged 6.37 percent, up from 6.27 percent the previous week. Rates on one-year adjustable-rate mortgages (ARMs) increased to 6.22 percent from 6.09 percent.

The ARM share of activity decreased to 29.6 percent of total applications from 30.7 percent the previous week.

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.

While analysts differ on whether or not there is a housing bubble, most agree that the market is cooling off from its record run.

The MBA's data followed separate reports this week showing a mixed picture of the U.S. housing sector.

The Commerce Department on Tuesday said the pace of U.S. housing construction rose more than expected in May after three months of declines as groundbreaking on both single-family and multifamily units jumped.

May housing starts rose 5.0 percent in May to a 1.957 million unit annual pace compared with an upwardly revised 1.863 million unit rate in April.

The National Association of Home Builders on Monday said U.S. home-builder sentiment sank to its lowest in more than 11 years in June as rising interest rates made houses less affordable and sent speculators fleeing.

The National Association of Home Builders/Wells Fargo Housing Market Index of sentiment fell 4 points to 42 in June from an upwardly revised 46 in May, the NAHB said. The median forecast of analysts polled by Reuters was for a level of 45.

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

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