The Mortgage Bankers Association's index of applications to buy a home or refinance an existing loan dropped 1.3% last week to 533.8 from 540.8 the prior week. The gauge of purchase applications declined 2.4% to 389.

Higher mortgage rates are slowing home sales after five straight record years. Combined with a slowdown in mortgage refinancing that's been a source of cash for homeowners the past several years, the weakening housing market will weigh on the economy, economists said.

Anthony Chan, chief economist at JPMorgan Private Client Services in New York, said that the general trend is undeniably toward a softening in housing, which has been an important anchor for consumer spending. He said that there will be a lot less support for spending. It's certainly a risk for growth.

By M. Sese
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