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Economy in Brief

Mortgage Applications Up With More Refinancings
by Tom Moeller August 16, 2006

The total number of mortgage applications rose 1.4% last week following a 4.9% rise the week prior.

The gains were led by rebounding applications to refinance which rose 4.6% on top of a 7.1% increase during the first week of August. Refis are up 17.1% from the lows in June.

Conversely, purchase applications last week fell for the fourth week in the last five and posted a 0.8% dip which pulled purchase apps in August 2.5% below the July average.

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.

The effective interest rate on a conventional 30-year mortgage increased to 6.73%. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also rose to 6.42% and the peak rate was 6.75%. 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.

In July, 35.4% of all loan applications were to refinance, down from 44.2% last July.

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.

Property Debt Burdens from the Federal Reserve Bank of San Francisco can be found here.

MBA Mortgage Applications (3/16/90=100) 08/11/06 08/04/06 Y/Y 2005 2004 2003
Total Market Index 561.2 553.3 -26.3% 708.6 735.1 1,067.9
  Purchase 385.9 388.9 -22.7% 470.9 454.5 395.1
  Refinancing 1,587.5 1,518.1 -30.5% 2,092.3 2,366.8 4,981.8
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