The Mortgage Bankers Association (MBA) reported today that applications for U.S. home mortgages dropped last week to their most sluggish pace since December 2000. The group's seasonally adjusted index of mortgage application activity declined by 1.5% to 419.3 in the week ended August 15, while the index of refinancing applications fell 3.7% to 1,034.5.

Meanwhile, the MBA's index for loan requests for home purchases also declined, shedding 0.4% to 314. Despite new legislation meant to provide an incentive for new home buyers, many potential borrowers are shying away from the currently tight credit-lending environment.

Also last week, average 30-year fixed mortgage rates dropped to 6.47% from 6.57%.