The total number of mortgage applications fell a sharp 4.8% last week on the heels of a 7.9% decline the prior period according to the Mortgage Bankers Association. The decline pulled the average level of applications in October 7.8% below September.

Purchase applications fell especially hard last week, dropped 6.2% following a 7.4% decline the week earlier and pulled the October average 5.0% below September's. 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 fell another 2.8% following an 8.5% decline the prior week. The October average fell 11.4% from September and the figure was 77.5% below the high during 2003.

The effective interest rate on a conventional 30-year mortgage rose to 6.46% from 6.30% the prior week and the effective rate on a 15-year mortgage rose to 6.06%, the highest since July 2002. 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.