Interest rates soared as the US economy continues to show resilience, signalling to the market that the US Federal Reserve may not be done raising interest rates.

The average 30-year interest rate stood at 7.31 per cent, which dampened demand for home purchase mortgages somewhat, bringing it to its lowest level since April 1995.

Demand for both home purchases and refinancing fell. That generally drove down the market composite index, which measures mortgage applications, the Mortgage Bankers Association (M.B.A.) said Wednesday.

In the week ended Aug. 18, the market index fell 4.2 percent from a week earlier to 184.8. A year ago, it stood at 270.1.

KEY DETAILS High mortgage rates are dragging down homebuyers' budgets as borrowing costs increase. Many homebuyers fled the market as interest rates rose last week. The Home Buyer's Index, which measures applications for purchase mortgages, fell 5 per cent from last week.

Interest rates are hardly enticing for homeowners looking to refinance. The refinance index fell 2.8 per cent.

Interest rates rose across the board.

The average contract interest rate for 30-year home mortgages with a sale price of $726,200 or less was 7.31 percent for the week ending Aug. 18, up from 7.16 percent the week before, the M.B.A. said.Rates on 30-year loans were at their highest level since December 2000.The M.B.A. said the rate was up from 7.16 percent the week before.

The rate on 30-year mortgages for jumbo loans, homes selling for more than $726,200, was 7.27 percent, up from 7.11 percent the previous week.

The average rate on 30-year mortgages backed by the Federal Housing Administration rose to 7.09 percent from 6.93 percent.

Rates on 15-year mortgages rose to 6.72 percent from 6.57 percent the previous week.

Rates on adjustable-rate mortgages rose to 6.5 per cent from 6.2 per cent last week. The percentage of adjustable-rate mortgages rose to 7.6 per cent, the highest level in five months.

 The housing market continues to be buffeted by positive economic news, which pushes up interest rates and dampens home sales. Higher interest rates also discourage homeowners from selling their homes because their purchasing power is diminished when they are looking for a home to buy.

As a result, both the demand for homes and the supply of homes continue to fall, causing the market to stagnate. Until the economy shows signs of slowing, the housing market is likely to remain sluggish.

Applications for purchase mortgages fell to their lowest level since April 1995 as homebuyers exited the market due to the high interest rate environment and declining purchasing power, Joel Kan, deputy chief economist and vice president of the American Home Mortgage Lenders Association, said in a statement.

Kan added that the number of people using adjustable-rate mortgages has increased. Some homebuyers are looking to lower their monthly payments by accepting some interest rate risk after the initial fixed-rate period, he said.