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Economy in Brief

Mortgage Applications Meander, Interest Rates Jump Further
by Tom Moeller March 15, 2006

The total number of mortgage applications slipped 0.2% following a 0.7% increase the prior week. In March, applications are 1.9% below the February average which fell 6.3% m/m.

The effective interest rate on a conventional 30-year mortgage jumped for the second week. The nine basis point rise in the effective rate on a 15-year mortgage to 6.36% was to the highest level since mid-2002. The ten basis point rise in the effective rate on a 30 year mortgage pulled it to 6.65%. Interest rates on 15 and 30 year mortgages are closely correlated (>90%) with the rate on 10 year Treasury securities and during the last ten years there has been a (negative) 82% correlation between purchase applications and the effective rate on a 30-Year mortgage.

Purchase applications rose for the first week in three, by 1.0%. The March level is down 1.4% from the February average.

During the last ten years there has been a 50% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.

Applications to refinance retraced most of the prior week's rise and fell 1.9%. The March level is 2.1% below the February average which fell 2.0% from January.

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) 03/10/06 03/03/06 Y/Y 2005 2004 2003
Total Market Index 574.4 575.6 -21.1% 708.6 735.1 1,067.9
  Purchase 403.0 399.0 -12.9% 470.9 454.5 395.1
  Refinancing 1,583.6 1,614.4 -30.2% 2,092.3 2,366.8 4,981.8
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