U.S. home loan demand cooled last week as rising mortgage rates curbed refinancing requests that had soared to a 14-month high, the Mortgage Bankers Association said on Wednesday.

Loan requests to buy homes rose for the second straight week to the highest level since the end of June, but hovered just above 13-year lows. Refinancing still represents nearly 8 out of every 10 mortgage applications.

Many consumers doubt that job market improvement is around the bend, and lending standards remain tight, putting home buying out of reach even with borrowing costs near record lows.

The industry group's mortgage market index fell by a seasonally adjusted 4.4 percent in the week ended July 23. A 5.9 percent refinancing applications drop overshadowed a 2.0 percent rise in home purchase loan demand.

Average 30-year mortgage rates climbed to 4.69 percent, up 0.10 percentage point in the week from the lowest level since the group starting tracking rates weekly in 1990.

Low borrowing costs and high affordability drove the slight pick-up in home buying demand from extremely depressed levels in the wake of now-expired federal tax credits.

Buyers rushing for up to $8,000 in tax incentives had to sign contracts by April 30, which fired up spring sales at the expense of summer transactions.

Sales of new homes surged in June, yet posted the second lowest level in 47 years of record keeping, the Commerce Department said on Monday. The weakest level was set in May on the heels of the credit's expiration.

It's just an indication that demand for housing at the moment is very weak given that the incentives have just come off, said Bob Baur, chief global economist at Principal Global Investors in Des Moines, Iowa.

Housing is bottoming now, fighting strong headwinds created by unemployment flirting with 10 percent, he said.

Consumers are clearly worried about economic growth that is seen to be faltering somewhat, said Baur, who thinks chances of a double-dip recession are slim.

Home prices rose for a second straight month in May, but housing might bounce along the bottom for the foreseeable future before sustaining improvement that will filter through the rest of the economy, Standard & Poor's said on Tuesday.

We are going to see a fairly long period where mortgage demand remains weak, based on a view that unemployment is going to remain very high, income growth is going to be pretty subdued and confidence is going to remain quite low, said Paul Dales, U.S. economist at Capital Economics in Toronto.

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