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Demand for U.S. mortgage applications climbed last week from a nearly eight-year low, while borrowing costs dipped, a trade group said on Wednesday.

The Mortgage Bankers Association's seasonally adjusted mortgage applications index, which includes both purchase and refinance loans, increased 16.8 percent to 476.7 in the week ended Oct. 24, reversing the prior week's 16.6 percent slump to the lowest reading since December 2000.

Requests for applications to buy homes as well as refinance mortgages increased last week after posting similar declines the previous week.

AP

The trade group's seasonally adjusted purchase index rose 8.5 percent to 303.1 after falling 10.9 percent the prior week, while its refinancing applications gauge jumped 28.5 percent to 1,489.4 following a 23.5 percent downturn.

Average 30-year mortgage rates dipped 0.02 percentage point last week to 6.26 percent. The rate has risen as high as 6.59 percent during the summer but was as low as 5.49 percent in January, according to the Mortgage Bankers Association.

The upturn in demand for applications comes amid mostly disheartening signs about the health of the U.S. economy and housing.

ome prices in August were nearly 22 percent below their peak in June 2006, according to a Standard & Poor's/Case-Shiller Home Price Index reported on Tuesday.

The worsening global financial crisis intensified anxiety about employment and pessimism about the future, meantime, sent U.S. consumer confidence plummeting to a record low this month, the Conference Board said on Tuesday.

A deep recession would mean prolonged housing weakness, analysts contend. House prices are generally seen sliding another 10 percent.