Applications for U.S. home mortgages slipped last week in a setback from the record jump in the previous period after a Federal Reserve proposal aimed at lowering interest rates, according to data from an industry group on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity fell 7.1 percent to 796.8 in the week ended Dec. 5.

The index had more than doubled in the week before after the Fed announced a plan to purchase up to $500 billion in mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae.

While anticipated, the MBS purchases have yet to begin, and consumer rates barely extended their big drop from the previous week, according to MBA data.

Greater demand for MBS lowers yields, allowing lenders planning to sell loans into the bond market to offer lower rates to consumers.

The MBA index of refinancing applications declined 0.9 percent to 3,767.3 last week. Its gauge of loan requests for home purchases fell 17.4 percent to 298.1.

Fixed 30-year mortgage rates averaged 5.45 percent last week, down from 5.47 percent in the prior week, the MBA said.

Mortgage rates are at their lowest level since March 2004, and are expected to continue to fuel a wave of refinancing and offset the U.S. economic downturn.

But the credit crunch has tightened lending standards sharply since the housing boom ended in 2006, locking many borrowers out of refinancings no matter how low the rate, analysts said.

The MBA composite index of mortgage applications is falling short of levels above 1,000 earlier this year when mortgage rates last hovered around 5.5 percent.