U.S. mortgage applications fell for the first time in four weeks even as interest rates dropped to a six-month low, an industry trade group said on Wednesday, providing further evidence the country's housing market slump is deepening.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity, which includes both refinancing and purchasing loans, for the week ended Sept. 22 decreased 4.9 percent to 566.6 from the previous week's 595.8, which was its highest level since April.

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Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.18 percent, down 0.18 percentage point from the previous week, to its lowest level since February. Interest rates were above year-ago levels of 5.85 percent, but sharply below a four-year high of 6.86 percent touched in June.

Historically low mortgage rates fueled the most recent housing boom, but last week's plunge in rates failed to lure consumers.

The MBA's seasonally adjusted purchase mortgage index, widely considered a timely gauge of U.S. home sales, fell 5.5 percent to 375.9. The index was also substantially below its year-ago level of 483.1.

The group's seasonally adjusted index of refinancing applications decreased 4.1 percent to 1,677.5. The index stood at 2,106.6 a year earlier.

The refinance share of applications increased to 44.3 percent from 43.7 percent the previous week, its highest level since September 2005.

Fixed 15-year mortgage rates averaged 5.81 percent, down from 6.04 percent. Rates on one-year adjustable-rate mortgages (ARMs) decreased to 5.90 percent from 5.95 percent.

The ARM share of activity decreased to 26.4 percent of total applications from 27 percent the previous week.

Recent measures of housing activity have pointed not just to a slowdown, but to a sector that is struggling, with sales sliding, supply swelling and demand dwindling.

The MBA's soft data followed a separate report this week showing widespread weakness in the U.S. housing sector.

The National Association of Realtors on Monday said the pace of existing home sales in the United States fell for a fifth straight month in August and prices dropped from year-ago levels for the first time in 11 years.

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

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