Mortgage application volume fell 11.9% last week on a seasonally adjusted basis, coinciding with the recent run-up in the 10-year Treasury note yield, which reached its highest level in nearly two years.

The Mortgage Bankers Association's market composite index -- a measure of mortgage loan applications for purchases and refinancings -- fell to 654.1 for the week ended May 14 from 742.2 one week earlier, according to its weekly applications survey. On an unadjusted basis, the index fell 11.6% from last week and was down 55.8% from the same week a year earlier.

The seasonally adjusted purchase index fell by 8.1% from last week, while the refinance index decreased by 16.8%.

The refinance share of mortgage activity fell to 37.4% of total applications from 39.8% the previous week. The adjustable-rate mortgage share of activity rose to 35.2% of total applications from 34.8% the previous week.

The average contract interest rate for 30-year fixed-rate mortgages fell to 6.21% from 6.32% from one week earlier, with points decreasing to 1.39 from 1.44 the previous week (including the origination fee) for 80% loan-to-value ratio loans.

Economists have been awaiting the impact of higher interest rates on mortgage applications and refinancings -- which have done much to sustain recent economic growth -- but differ on the magnitude of the slowdown within the context of the current economic recovery and job growth.

The 10-year Treasury note yield, currently at 4.77%, has risen steadily in the last two months from its 2004 low of 3.67% set in late March.