Mortgage rates spike, mortgage refis slump

U.S. mortgage rates rose last week while applications for refinancing slumped, with home buyers running up close against the deadline for an $8,000 tax incentive. Home purchase contracts need to be signed by the end of April in order to qualify for the credit and home loans must be closed by the end of June.

BusinessWeek susses out potential cons of the tax credit's ability to effective in the long-term:

The average rate on a 30-year fixed mortgage rose to the highest level since August as the economy showed signs of strengthening. The end of a tax credit for homebuyers and rising foreclosures this year represent hurdles to a sustained recovery in housing. "We're concerned there won't be a lot of underlying demand for housing once the tax credit is gone," Adam York, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the report. "It's going to be a long slog."

The battle will heat up in Florida and California, states where several cities are dealing with the double trouble of high unemployment and housing woes.

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