Mortgage applications in America fell last week by the most since February as higher borrowing costs slowed purchases and pushed refinancing to its lowest level this year.

The Mortgage Bankers Association’s index of applications to buy a home or refinance an existing loan declined 5.8% to 562.1 from 596.8. The group’s refinancing index fell 8.8% last week to 1427.4, the lowest since the week ended December 23, from 1565.6.

The average rate on a 30-year fixed mortgage increased to 6.61%, the highest since June 2002.The five-year boom in housing will come to an end and weigh on the economy this year, economists forecast. Higher mortgage rates are slowing sales and refinancing, re moving a source of cash for consumers.

“If mortgage rates continue to rise, then housing-related activity will drop further and eventually begin to subtract from economic growth,” the president of Insight Economics, Steven Wood, said.

Federal Reserve policy makers hope to slow the economy enough to ensure inflation will remain in check. The Fed’s 15 straight increases since June 2004 have boosted rates on credit cards, auto loans, mortgages, and home-equity lines of credit.

The chairman of the Federal Reserve, Ben Bernanke, said in testimony to Congress on April 27, that a slowdown in housing “could prove a drag on growth this year and next.”

The average rate on a 30-year fixed mortgage rose from 6.57% a week earlier. At last week’s average rate, the monthly principal and interest costs for each $100,000 of a loan would be $639. A year ago, when the average rate was 5.77%, the payment was $585.

“The cost of credit is moving up,” Rupkey said. “Home prices have increased so much it is scaring people away. There’s sticker shock.”

The average rate on a 15-year fixed mortgage increased to 6.2% last week from 6.19%. The average one-year adjustable-rate mortgage dropped to 6.04% from 6.08% a week earlier.

The decline last week in the mortgage bankers index of purchase and refinancing applications was the largest since a 7.3% decrease in the week ended February 10. The group’s gauge of purchases dropped 3.9% to 416.5 last week from 433.3.

Refinancing’s share of loan applications fell to 33.8% last week from 35.2%.

The Mortgage Bankers Association’s survey, compiled every week since 1990, covers about half of all American retail residential mortgage originations.

Growth in real estate contributed more than half of the nation’s economy’s expansion since 2001, according to Merrill Lynch estimates. The economy expanded in the first quarter at an annual pace of 4.8%, the fastest in more than two years.

The pace of growth will slow to 3% by yearend, the National Association for Business Economics said on May 8.