The total number of mortgage applications reversed course last week and fell 7.9% after rising 6.1% the prior period according to the Mortgage Bankers Association. The decline pulled the average level in October 5.9% below September.

Purchase applications reversed more than all of the prior week's rise and fell 7.4%, placing the October average 2.8% below September's which rose 1.0% from August. During the last ten years there has been a 49% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.

Applications to refinance cratered 8.5% w/w to the lowest level since April and the October average is down 9.8% from September.

The effective interest rate on a conventional 30-year mortgage fell slightly to 6.30% from 6.35% the prior week. The low for 30 year financing was 5.71% in late June. The effective rate on a 15-year mortgage fell to 5.90%. The interest rate on 15 and 30 year mortgages are closely correlated (>90%) with the rate on 10 year Treasury securities.

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.

Cash-Out Refinancing: Check It Out Carefully from the Federal Reserve Bank of St. Louis is available here.