As homeowners sit on their properties and find little incentive to sell and forgo ultra-low mortgage rates, current loan rates remain high, adding hundreds of dollars in additional fees for buyers.

At the beginning of June, the average rate on a 30-year mortgage was 6.81 percent.

Demand for both purchase loans and refinancing is falling. That pushed the market composite index - a measure of mortgage application volume - down, the Mortgage Bankers Association said Wednesday.

The market index fell 1.4 percent to 194.7 for the week ended June 2, compared with a week earlier. A year ago, the index stood at 288.4.

Key details: Homeowners did not consider last week a good time to refinance. The refinance index fell 0.7 percent.

Homebuyers were also disappointed with rising interest rates. The purchase index - which measures mortgage applications for home purchases - fell 1.7 percent from last week.

The average contract rate for a 30-year mortgage on a home priced at $726,200 or less was 6.81 percent for the week ending June 2. That was down from 6.91 percent the previous week, the bankers association said.

The rate for jumbo loans, 30-year mortgages on homes selling for more than $726,200, was 6.74 percent, down from 6.78 percent the previous week.

The 15-year rate fell to 6.25 percent from 6.41 percent last week.

The current rate on adjustable rate mortgages rose to 5.93% from 5.39% last week.

While some buyers may be accepting the reality that rates are currently above 6%, the lack of homes for sale and options is keeping the housing market relatively stagnant.

As long as interest rates remain high, homeowners may not see an incentive to sell unless forced to do so out of necessity. This will continue to put pressure on the housing market and could drive home prices higher until demand is significantly reduced or supply improves significantly.

Buying activity is constrained by reduced purchasing power from higher interest rates and a continued lack of inventory for sale in the market," Joel Kan, vice president and deputy chief economist at the Mortgage Bankers Association, said in a statement.

At the same time, he added, "interest rate incentives remain very low for borrowers refinancing."