NEW YORK - The demand for U.S. mortgage applications to purchase homes rose last week for a third straight week as interest rates tumbled, the Mortgage Bankers Association said on Wednesday.

The low rates also buoyed demand for home refinancing loans, with activity rising in five out of the past eight weeks, the industry group said.

The trends provide a glimmer of hope for a housing market that has been struggling since the April 30 expiration of popular home buyer tax credits.

The MBA said its seasonally adjusted index of mortgage applications USMGM=ECI, which includes both purchase and refinance loans, increased 1.3 percent in the week ended July 30. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 0.3 percent.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 4.60 percent, down 0.09 percentage point from the previous week, the MBA said. The rate was up just 0.01 percentage point from a record low set two weeks earlier. The survey has been conducted weekly since 1990.

Interest rates were also below their year-ago level of 5.17 percent.

The seasonally adjusted purchase index USMGPI=ECI, a tentative early indicator of home sales, increased 1.5 percent. Demand, however, is down about 40 percent since the tax credit expiration.

To take advantage of the tax credits, buyers had to sign purchase contracts by April 30. Contracts originally had to close by June 30, but that was extended another three months.

Kurt Gleeson, national vice president of sales at RealEstate.com, a division of LendingTree, which is headquartered in Charlotte, North Carolina, said he expects poor home sales over the next two to three months.

The housing market is sputtering, he said. There is a smaller pool of buyers who can afford to purchase a home. The economy, and more specifically, the sluggish employment market, has excluded many potential buyers from the housing market.

Jobs growth ranks No. 1 in importance for the housing market and without it there will be no rebound, Gleeson said.

Key insight into the state of the jobs market will emerge on Friday when the U.S. Labor Department releases July data.

The MBA's seasonally adjusted index of refinancing applications USMGR=ECI increased 1.3 percent.

The MBA said fixed 15-year mortgage rates averaged 4.03 percent, down from 4.12 percent the previous week, a record low. Rates on one-year adjustable-rate mortgage, or ARMs, decreased to 7.10 percent from 7.15 percent. (Editing by Leslie Adler)

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