Application for home loans in the US dropped more than 8 percent as borrowing cost of fixed rate mortgages increased last week, a banking period which was shortened by the Labor Day holiday, a weekly report by the Mortgage Bankers Association said Wednesday.

Total loan applications were still at the highest levels seen since early June, with borrowers still wanting to take advantage of the federal tax credit for first-time home buyers which is about to end on November 30.

Mortgage rates remain relatively low, which help sustain demand for potential buyers.

With the program about to close, the real estate industry is concerned about whether housing can sustain the momentum when the program ends. With this, the industry is pressing Congress to extend the tax credit from first time buyers only to all buyers and increase the size from $8,000 to $15,000.

Average 30-year loan rates increased 0.06 percentage point to 5.08 percent last week. The rate was still above the record low of 4.61 percent set in March, but still below the 5.82 percent a year ago, the industry group said.

The seasonally adjusted mortgage applications index declined 8.6 percent in the week ended Sept. 11 to 592.8, driven by a 10.3 percent slide in its purchase application index and a 7.4 percent drop in refinancing applications.