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Economy in Brief

Mortgage Applications Ticked Higher
by Tom Moeller October 25, 2006

The total number of mortgage applications ticked 0.5% higher last week following two consecutive weeks of hefty decline, according to the Mortgage Bankers Association. Due to a sharp increase at the end of last month, the average level of applications during October nevertheless is 0.3% higher than during September.

A 1.8% w/w rise in applications to refinance followed two consecutive weeks of decline. Refis in October are 4.9% higher than during September.

Moving the other way, purchase applications slipped 0.6%. That lowered the average level of purchase apps in October 3.1% below September which rose 3.2% from August.

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. sharp increases late last month.

The effective interest rate on a conventional 30-year mortgage rose to 6.57%. The peak for 30 year financing was 7.08% late in June. The rate for 15-year financing also rose slightly to w/w to 6.29% versus 6.20% averaged last month. 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.

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.

The latest release from the Mortgage Bankers Association indicated that 4.4% of mortgage loans were past due during the second quarter of this year, down sharply from the 4.7% past due at the end of 2005. Foreclosure had been started, however, on an increased 4.43% of loans versus 4.36% at the 2003 low.

Do Households Benefit from Financial Deregulation and Innovation? The Case of the Mortgage Market from the Federal Reserve Bank of Boston is available here.

MBA Mortgage Applications (3/16/90=100) 10/20/06 10/13/06 Y/Y 2005 2004 2003
Total Market Index 588.6 585.8 -13.3% 708.6 735.1 1,067.9
  Purchase 382.4 384.7 -18.0% 470.9 454.5 395.1
  Refinancing 1,790.4 1,758.2 -6.6% 2,092.3 2,366.8 4,981.8
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