The group's refi gauge leapt 26.3% as the average 30-year mortgage rate dipped to 5.01%, which is expected to rise later this year. The purchase index climbed 10%, suggesting that a renewed and expanded gov't tax credit is spurring demand after sales fell late last year on expectations the incentive would expire.

Euro zone, U.K. services slow

The 16-nation bloc's service sector expanded at a slightly slower pace in Jan. as Markit's purchasing managers' index fell to 53.5 vs. 53.6 in Dec. It was the 5th straight month the gauge stayed above the boom-bust 50 mark. A growing concern is that while services in Germany, France and Italy continued to expand, albeit slower, the service sector slump in Ireland and Spain deepened. Separately, heavy snow and a sales-tax hike led to an unexpected slowing in the U.K. service sector in Jan. But investors still expect the Bank of England to halt its pro-growth quantitative easing program this week.

Britain's consumer confidence rose in Jan. as the labor market showed signs of revival, suggesting the recovery is on track. A sentiment measure rose 3 points to 73, nearly double the low of 39 a year ago.