Mortgage rates held steady the last week of February, but the first three weeks of the shortest month of the year saw mortgage applications tank.

For some it’s a sign that the housing economy is faltering, but for other analysts, there’s nowhere to go but up.

“The rise in mortgage rates put a dampener on mortgage applications in February,” said Paul Diggle, property economist at Capital Economics. “However, with affordability set to remain favorable and the wider economy growing strongly, mortgage volumes and home sales should strengthen from here.”

Noting that the marginal rise in the Mortgage Bankers Association measure of 30-year mortgage interest rates, to an average of 3.91% in February, follows the rebound in 10-year Treasury yields over the past month, Diggle said that the rise in yields was presumably spurred by the strength of the recent labor market data, fuelling expectations that the Fed will soon begin hiking rates.

“Although we expect mortgage rates to continue rising gradually in line with yields this year, in February they remained close to a 20-month low,” he said. “However, as a result of this slight rise, mortgage applications for refinancing were broadly unchanged in February, following January’s 54% month-over-month surge. This still leaves them close to an 18-month high, but as mortgage rates are likely to rise from here it appears that the refinancing boom that began last month may not persist for quite as long as we had expected.”

None of this worries Diggle in the long run.

 “Credit conditions are loosening, and even with mortgage rates set to rise as the Fed hikes rates, affordability will remain favorable by historical standards,” he said. “With the wider economy growing strongly and survey evidence already showing an upturn in Realtor confidence, we continue to expect mortgage demand to pick up in 2015.”