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Economy in Brief

Mortgage Applications Up Slightly
by Tom Moeller July 18, 2007

The total number of mortgage applications rose 1.9% last week following a 1.1% gain the prior week, according to the Mortgage Bankers Association.

Higher applications to refinance led the increase in the total with a 4.9% increase after three consecutive down weeks.

Purchase applications fell 1.6% after the prior week’s 3.8% increase.

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 fell slightly to 6.93% from 6.96% the prior week. Rates averaged 6.84% last month, up from 6.28% in December. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing similarly fell to 6.63% last week. 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 and 35 top lenders in the U.S. housing industry. Then it derives its refinance, purchase and market indexes. The weekly survey covers roughly 50% of all U.S. residential mortgage applications processed each week by mortgage banks, commercial banks and thrifts. Visit the Mortgage Bankers Association site here.

MBA Mortgage Applications (3/16/90=100) 07/13/07 07/06/07 Y/Y 2006
Total Market Index 631.6 626.2 16.8% 584.2
  Purchase 446.5 4523.9 12.0% 406.9
  Refinancing 1,717.4 1,636.9 24.7% 1,634.0
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