Mortgage applications dropped last week as a result of higher mortgage rates and bad weather.

The Mortgage Bankers Association (MBA) reported the average contract interest rate for 30-year fixed-rate mortgages rose nine basis points to 5.03% for the week ending Feb. 19. In response, the Refinance Index fell 8.9% to ~2606.

Meanwhile the Purchase Index was down 7.3% to ~197, its lowest level since May 1997, the MBA said.

Michael Fratantoni, vice president of research and economics, attributed the drop in purchase applications to East Coast markets digging out from the blizzard. The abundance of housing inventory also reduces the urgency to lock in purchases at this time, as well, he added.

However, the expiration of the homebuyers tax credit at the end of April should help to spur purchase activity as the deadline approaches.

As a percent of total application activity, the refinancing share was 68.1% compared with 69.3% in the previous week. ARM share was higher at 4.7% from 4.4%

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