Applications for loans to buy homes and to refinance home mortgages crept up last week even though 30-year U.S. mortgage loan rates remained above the key psychological seven percent level.

The hearty demand for loans to buy homes suggests the U.S. economy's one firm foundation, the housing market, remains intact even as borrowing costs have risen slightly.

That appetite for housing likely will remain lively even if rates continue rising, because upbeat consumers have been cheered by signs of improvement in the U.S. economy.

"It is certainly a sign that housing is very strong. They (consumers) are still going out and buying homes," said Phil Colling, economist at the Mortgage Bankers Association of America (MBA), which surveys 20 to 35 mortgage banks each week, among them the top lenders in the U.S. housing industry.

The MBA's measure of demand for loans to purchase a home, the purchase index, rose 6.3 percent to 330.4 in the March 22 week and its measure of home loan refinancings, the MBA refinance index, rose 3.2 percent to 1,450.6 that week.

Colling said demand for refinancings likely will cool when 30-year rates rise above 7.30 percent.

In the latest week, the 30-year rate was at 7.14 percent, the MBA said. This rate rose above 7 percent in the week ended March 13, the first time since the Jan. 25 reporting period. It has been above 7 percent for three consecutive weeks.

The MBA economist said that by the second quarter of this year, he expects the 30-year rate to rise to 7.2 percent, and to hit 7.4 percent in the third quarter.

"You can't say when purchase activity gets damped by higher rates. In year 2000, the first few months saw strong housing (activity) and rates were at or above 8 percent," said Colling. "If the economy is strong, people can afford to pay a higher rate."

Indeed, the MBA's measure of applications to buy homes is actually up 13 percent from a year ago. A strong element in these gains has been the increased use of adjustable-rate mortgage (ARMs) loan products, which have lower rates that allow borrowers to qualify for higher loan amounts. These ARM loans are up 36.6 percent from a year ago.

Also, demand for loans to buy a piece of the American Dream is sure to be bolstered by strong consumer confidence.

That healthy outlook among consumers was evident in a report released Tuesday that showed March consumer confidence post its largest one-month jump in 25 years.

Colling said demographics likely will shore up housing sales. "The so-called baby boomer generation has entered or is entering its prime earnings years. So, they want to buy a bigger house or buy a house for the first time," said Colling.

With confidence increasingly upbeat and these demographic factors, the business of financing home purchases is going to become a greater factor in total mortgage bank lending.

Refinancings once accounted for over 75 percent of total loan applications and now they amount to 40.2 percent of the week's mortgage loan business.

This year, Colling estimated, mortgage lending should total $1.47 trillion, but refinancings will make up only 38 percent of the loans processed by mortgage lenders.