Demand for loans to buy U.S. homes fell last week for the fourth straight week, holding 13-year lows, as the housing market adjusted to a selling environment without the federal tax credits that had stoked April sales, the Mortgage Bankers Association said on Wednesday.

Home buying ran out of steam after eligible borrowers sprinted to meet the April 30 deadline for up to $8,000 in tax credits. The incentive pulled house sales forward and triggered the largest monthly construction spending gain in nearly a decade.

Total loan applications eked out a 0.9 percent rise in the week ended May 28, seasonally adjusted, as a 2.4 percent in refinancing demand offset a decline of 4.1 percent in purchase loan requests to the lowest level since April 1997.

Purchase applications are now almost 40 percent below their level four weeks ago, while the refinance share, at 74 percent, is at its highest level since December, Michael Fratantoni, MBA's vice president of research and economics, said in a statement.

Average 30-year mortgage rates rose 0.03 percentage point to 4.83 percent last week, but the low rate drove more homeowners to apply for refinancing. The rate rose as high as 5.31 percent in early April before euro zone market troubles triggered a flight to safety in U.S. Treasuries, driving down their yields, which are used as a peg for mortgage rates.

A so-called hangover from more than a year of the tax credits had been widely expected, and most economists expect U.S. housing can stand on its own footing as the year progresses.

This volatility in activity is the price paid for higher average levels of sales across the year as a whole than would have occurred without the tax credit, Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote on Tuesday.

Buying a home, for qualified purchasers, remains affordable with mortgage rates historically low and prices down about 30 percent on average from their peaks in 2006.

But at least in the weeks since the tax credits expired, homeowners are concentrating on shaving costs by refinancing.

The MBA's refinance applications index has risen for four straight weeks to its highest level since October 2009.

Still, refinancing is also experiencing burnout, with fewer people acting to refinance each time mortgage rates fall near current levels, Fratantoni said in an interview.

The refi index, at roughly 3,300 last week, is well below the most recent peak of about 7,400 in early January 2009 when 30-year mortgage rates were roughly similar. In 2003, when the loan rate was just under 5 percent, the refinance index shot up to about triple last week's level.

A lot of people would benefit from getting a lower rate but they don't have equity, they don't have income, they don't have credit, Fratantoni said. You're getting a response, but it's a fairly muted response.

(Editing by Leslie Adler)

Mortgage