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Economy in Brief

Low Mortgage Rates Stimulate Borrowing
by Tom Moeller September 8, 2004

The effective interest rate on a conventional 30-year mortgage ticked up last week to 6.06% from 6.02% the prior week, but those rates were little changed from the 6.04% averaged in August. In May, 30-year financing averaged 6.53%. The effective rate on a 15-year mortgage was 5.49%.

The index of mortgage applications compiled by the Mortgage Bankers Association jumped 7.7% from the prior week as purchase applications surged 7.4% and began the month 6.1% above August which fell 2.8% from July.

During the last ten years there has been a 59% correlation between the y/y change in purchase applications and the change in new plus existing home sales.

Applications to refinance mortgages surged 8.0%following two weeks of decline. Refi's began September 7.5%% ahead of August.

The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site here.

MBA Mortgage Applications (3/16/90=100) 09/03/04 08/27/04 Y/Y 2003 2002 2001
Total Market Index 692.0 642.7 -10.3% 1,067.9 799.7 625.6
  Purchase 476.0 443.1 16.4% 395.1 354.7 304.9
  Refinancing 1,948.9 1,804.1 -32.4% 4,981.8 3,388.0 2,491.0
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