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Economy in Brief

Mortgage Applications Up, Rates Fell
by Tom Moeller July 6, 2006

The total number of mortgage applications rose 5.9% last week and recovered about all of the prior week's sharp decline. For the month of June, the average number of applications fell 1.5% from May.

A 6.5% increase in purchase applications recovered all of the prior week's decline but nevertheless left the June average 0.8% below May which fell 0.8% from April.

During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.

Applications to refinance rose 5.0% after a 7.5% drop the prior week. Refis during all of June were 3.1% below the May average.

The effective interest rate on a conventional 30-year mortgage reversed half of the prior week's rise with a six basis point decline to 7.02%. The rate on 15-year financing reversed most of the prior week's gain with a seven basis point decline to 6.68%. Interest rates on 15 and 30 year mortgages are closely correlated (>90%) with the rate on 10 year Treasury securities.

During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.

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) 06/30/06 06/23/06 Y/Y 2005 2004 2003
Total Market Index 561.0 529.6 -34.3% 708.6 735.1 1,067.9
  Purchase 414.2 389.0 -20.5% 470.9 454.5 395.1
  Refinancing 1,423.9 1,356.0 -48.9% 2,092.3 2,366.8 4,981.8
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