Declines in mortgage applications indicate a cooling housing market, despite the recent decrease in interest rates.

The Mortgage Bankers Association's seasonally adjusted index of mortgage application activity fell by 1.4% for the week ending June 2 to 534.4.

The seasonally adjusted index hit it's lowest level since the week ended Dec. 30, 2005 last week. It was down 3.8% to 1,356.0. Last year at this time, the index stood at 2,362.1.

Refinancings hit their lowest level since April 2002, according to the MBA report.

The refinancing share of mortgage activity fell to 34.2% of total applications, down from 34.9% the week earlier.

Borrowing costs on 30-year fixed-rate mortgages averaged 6.60 for the week, down 0.06% from the previous week. However, the rates remain well above last year's 5.55% for the week.

Adjustable rate mortgages took 29.4% of total applications for the week, down from 30.7% for the previous week.

The purchase index, a well-known gauge of U.S. home sales, was substantially below last year's level of 479.3, down to 395.6.

The decline in refinancing is blamed for driving overall mortgage activity to its lowest level since May 2002.

"The good news for consumers looking to purchase is that long-term interest rates are still in a range that historically is quite low, but homeowners with adjustable rate mortgages are looking to avoid higher than necessary payments by refinancing into fixed-rate mortgages now before their current mortgage adjusts," said Bob Walters, chief economist for Quicken Loans.