The Mortgage Bankers Association reported today that applications for home loans fell last week for the first time in three weeks. The industry group's market composite index declined by 0.4% compared to the previous seven-day period. This marks the sixth time in 10 weeks that the index has fallen. At the present level, it's off its May high by 52%.

It seems clear that higher mortgage rates are responsible for the downward trend. Since the first week of May, the average rate on a conforming 30-year fixed-rate mortgage has skyrocketed, going from 3.35%  to 4.57% in September. However, last week, following the Federal Reserve's decision not to taper, the rate dropped back down to 4.32%. The recent correction aside, the magnitude and speed of the advance have been unprecedented.

Applications to refinance existing mortgages have been the hardest hit by the hike in rates. Four weeks ago, for instance, the MBA's refinance index dropped by a precipitous 20%, the biggest single-week decline of 2013. With this in mind, last week's results, in which refinance applications were up 3%, was likely a welcome sign at the nation's largest mortgage originators.

Due largely to the drop in refinance volume, Wells Fargo (NYSE:WFC), the nation's largest mortgage originator, recently eliminated 2,300 positions in its mortgage department, JPMorgan Chase (NYSE:JPM) has acknowledged that it expects to lose money in its mortgage originations business in the latter half of the year, and Bank of America (NYSE:BAC) is letting 2,100 employees go for the same reasons.

This is only the latest such move. All three of these banks also felt the impact on their balance sheets last quarter, notching declines in accumulated other comprehensive incomes of $3.4 billion from Wells Fargo, $3.4 billion from JPMorgan Chase, and $4.2 billion from Bank of America. The trend led the chief executive of a regional bank to proclaim earlier this month that rising interest rates are the "next really big risk" to the banking industry.

Despite last week's uptick, refinance volumes are still off their early May high by 61%. Over the same time period, moreover, they've gone from a 76% share of overall mortgage application activity down to a 63% share.

Applications to purchase a home haven't been hit as hard. The MBA's purchase index decreased last week by 6%, though purchase-money mortgage applications remain down over the last four and a half months by a comparatively reasonable 16%. Compared to the same month last year, they're down by 4%.

John Maxfield owns shares of Bank of America. The Motley Fool recommends Bank of America and Wells Fargo. The Motley Fool owns shares of Bank of America, JPMorgan Chase, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.