The Mortgage Bankers Association's index of home-purchase applications declined 1.2% in the week ended Oct. 3, while a gauge of refinancing fell 7.7%. Both dropped back to levels seen in early September, when mortgage rates were on their way to a one-year low.

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A metric that combines the two applications measures fell 4.7% after plummeting 12.7% in the prior week, marking the biggest back-to-back declines since April.

While the 30-year fixed contract rate fell slightly to 6.43%, the prior week's jump was enough to spook prospective buyers and homeowners looking to lock in lower borrowing costs. That's stopped an early recovery in housing activity and threatens to prolong the market's years-long slumber.

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The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.