* Most fixed-rate mortgage rates rise to 7-year highs
* Home purchase application activity hit 6-week low
* Rising borrowing costs not squeezing home sales yet (Adds details on latest data, quote)
By Richard Leong
NEW YORK, May 23 (Reuters) - U.S. applications on mortgages to refinance an existing home fell to their lowest level in 17-1/2 years as some 30-year borrowing costs climbed to their highest levels in over seven years, the Mortgage Bankers Association said Wednesday.
Higher mortgage rates have pinched requests for mortgages to buy a home, although strong housing demand and tight supply have offset the rise in borrowing costs.
The Washington-based group for the U.S. mortgage industry seasonally adjusted measure on refinancing applications declined 3.7 percent to 1,018.1 in the week ended May 18, the lowest reading since December 2000.
The share of refinancing among weekly mortgage applications dipped to 35.7 percent from 35.9 percent the week before.
Refinancing "might not come back for years," said Jonathan Corr, president and chief executive at Ellie Mae.
Demand from millennials, loosely defined as people born in the early 1980s to the 1990s, and lean housing supply will likely support home sales and prices for the foreseeable future. "Demand is far outstripping supply," Corr said.
MBA's seasonally-adjusted gauge of home purchase applications fell 2 percent to 247.4, a six-week low.
The group's weekly barometer of total mortgage applications, adjusted for seasonal factors decreased 2.6 percent to 366.7, the lowest level since December.
Mortgage activity fell with rising home borrowing costs, which have moved in step with the increase in U.S. bond yields.
Expectations of faster economic growth and inflation since a sluggish first quarter have caused investors to reduce their bond holdings. Last Friday, benchmark 10-year Treasury yields reached 3.128 percent, the highest since July 2011, according to Reuters data.
Interest rates on 30-year fixed-rate "conforming" home loans, whose balances are $453,100 or less, rose to 4.86 percent, the highest since April 2011. They averaged 4.77 percent the prior week, MBA said.
Fifteen-year mortgage rates averaged 4.31 percent last week, the highest level since February 2011.
Average interest rate on five-year adjustable-rate loans rose to 4.12 percent, the highest since the MBA began tracking it since 1990.
While rising mortgage rates have yet to cause a meaningful drop in home sales, they together with growing home prices have made it expensive for potential home buyers, said Tian Liu, chief economist at Genworth Mortgage Insurance.
"There's some headwinds from higher mortgage rates," Liu said. "Affordability is an issue for us in the longer run."
(Reporting by Richard Leong Editing by Nick Zieminski)