Mortgage applications decreased 9.4 percent from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending November 25. This week's results included an adjustment for the Thanksgiving holiday.

The Market Composite Index, a measure of mortgage loan application volume, decreased 9.4 percent on a seasonally adjusted basis from one week earlier. The refinance share of mortgage activity decreased to 55.1 percent of total applications, the lowest level since June 2016, from 58.2 percent the previous week.

Mortgage rates have risen in step with rising U.S. Treasury yields as traders reduced their bond holdings on inflation worries due to stronger-than-forecast economic data and bets on a surge in federal borrowing under a Donald Trump presidency.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to its highest level since July 2015, 4.23 percent, from 4.16 percent.

The average contract interest rate for 15-year fixed-rate mortgages increased to its highest level since October 2014, 3.48 percent, from 3.35 percent.

"Mortgage lenders have been very thankful for a strong 2016 in terms of origination activity. However, mortgage application volume in the Thanksgiving week dropped sharply to the lowest level since early January, as mortgage rates increased to their highest point since July, 2015," Michael Fratantoni, chief economist for the MBA, told CNBC.

"The mix continues to shift towards higher balance loans, as the average purchase loan size reached a new survey record," Fratantoni said. "First-time buyers and buyers of lower priced units may have stepped away from the market to some extent given the jump in rates."

Mortgage rates and overall borrowing costs are rising as investors expect the Federal Reserve raising benchmark rates in December.

"All the drop is on refinancings," David Berson, former chief economist of Fannie Mae and current chief economist at Nationwide Insurance, told USAToday.

"With mortgage rates going up, affordability is down," Berson said. But "affordability is still at a fairly high level," he explained."Even though mortgage rates go up doesn't mean people will buy fewer homes," he said.

To be sure, a sustained surge in borrowing costs could further hinder first-time purchases at a time when rising values are already hurting affordability and pricing out buyers in many markets, Bloomberg reported.

(Newsmax wire services contributed to this report).

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