Mortgage applications drop as interest rate for traditional 30-year mortgage increases to 6.57%. The drop was 1.5% during the week ended Aug. 8 as fixed interest rates soar nearer to this year’s high, according to the Mortgage Bankers Association's weekly application survey. The MBA's application index dropped to 425.9 from 432.6 a week earlier.

Application volume weakened as fixed interest rates rose. The average rate for traditional, 30-year fixed-rate mortgages climbed to 6.57% during the week ended Aug. 8, just .02% shy of the 2008 high of 6.59% set last month.

The average rate for 15-year fixed-rate mortgages, which are more favored option for refinancing a home, went up to 6.17% from 6.02%. It was the year’s highest average interest rate for 15-year fixed-rate mortgages.

Refinance application volume fell 4.2 % during the week, while purchase volume remained. Refinance applications covered 35.2% of all applications during the week.

The index was at its highest at 1,856.7 during the week ending May 30, 2003, the height of the housing boom.

An index value of 100 is equal to the application volume on March 16, 1990 when the MBA started tracking application volume. A reading of 425.9 means mortgage application activity is 4.259 times higher than it was when the MBA began tracking the data.

The survey provides a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50% of all residential retail mortgage originations each week.

The average rate for one-year adjustable-rate mortgages declined slightly to 7.15% from 7.17%