NEW YORK (Reuters) - Applications for U.S. home mortgages retreated to sluggish levels last week as rising interest rates spoiled a spurt in loan refinancing, according to data published from an industry group on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity dropped 10.6 percent to 591.4 in the week ended Sept 19.

The MBA's seasonally adjusted index of refinancing applications declined 11.2 percent to 2,043.4 last week as the average 30-year mortgage rate surged 0.26 percentage point to 6.06 percent, the MBA said.

The MBA index of loan requests for home purchases fell 10 percent to 342.2.

U.S. Treasury yields surged last week from their lowest levels since May as investors, speculated on government intervention to ease the financial crisis, and dumped U.S. debt they had held as a safe-haven. Mortgage rates, influenced by Treasury yields, were also at their lowest level since May.

Benchmark yields this week have edged lower as investors reevaluated the impact of government plans, which include legislation to let the U.S. Treasury purchase troubled mortgage debt crippling financial institutions.

(Reporting by Al Yoon)

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