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Economy in Brief

Mortgage Applications Plunge Despite Lower Rates
by Tom Moeller October 13, 2004

Mortgage applications plunged last week according to the Mortgage Bankers Association (MBA). After two weeks at a relatively high level, the MBA index dropped 9.2% to the lowest level since August and so far in October is 0.7% below the September average.

The effective interest rate on a conventional 30-year mortgage fell to 5.95% from 6.05% the prior week. The effective rate on a 15-year mortgage fell to 5.39%.

A 14.2% w/w skid in applications to refinance led the decline but for the month they are still 3.1% ahead of September. Purchase applications fell 4.9% following a 2.2% drop the prior week. In October purchase apps are 3.6% below the September average.

During the last ten years there has been a 60% correlation between the y/y change in purchase applications and the change in new plus existing home sales.

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) 10/08/04 10/01/04 Y/Y 2003 2002 2001
Total Market Index 658.2 724.8 1.3% 1,067.9 799.7 625.6
  Purchase 436.3 459.0 21.5% 395.1 354.7 304.9
  Refinancing 1,949.2 2,270.8 -16.7% 4,981.8 3,388.0 2,491.0
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