Mortgage applications fell 6.7 percent last week and hit a four year low as rising interest rates and slowing home sales have put a double whammy on the mortgage marketplace. The anticipation that the Federal Reserve will raise interest rates this week is fortelling that the mortgage industry is going to see a very slow period.

Applications for mortgage loans at U.S. banks dropped by 6.7% last week to the lowest level seen on a seasonally adjusted basis since May 2002, the Mortgage Bankers Association said Wednesday. The number of mortgage applications was down 31% compared with a year ago.

Applications for mortgages to purchase homes fell a seasonally adjusted 6.2%, hitting the lowest level since November 2003. Purchase applications are down 19% in the past year. The MBA’s purchase index is expected to decline another 20% or so, said Ian Shepherdson, chief U.S. economist for High Frequency Economics. Applications for refinancing loans fell 7.5% on a seasonally adjusted basis. Refinance applications are down about 47% in the past year.

The decline in purchase applications has been much steeper than the recent drop in U.S. home sales. New-home sales have sunk about 6% in the past year, while sales of existing homes are down about 7%. The slowdown in home sales “has the potential to translate into a hard landing for the economy because the housing sector has played a major role in the current expansion,” said Asha Bangalore, an economist for Northern Trust.  via MarketWatch.

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