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Economy in Brief

U.S. Mortgage Applications Jumped
by Tom Moeller September 10, 2008

The total number of mortgage applications jumped 9.5% last week after a 7.5% increase during the week prior, according to the Mortgage Bankers Association. As a result, applications in early-September were 15.3% above the August average and the rise recovered an 11.5% decline during that month.

The latest figures include an adjustment to account for the Labor Day Holiday. On an unadjusted basis, the index decreased 13.6% compared with the previous week and was down 24.4% compared with the same Labor Day week one year earlier. In early September the level of all mortgage applications was down by one-quarter from the year-ago level.

Purchase applications rose by 6.4% after the prior week's 10.5% increase. Early this month applications rose 15.4% from August during which they declined 6.1%.

During the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.

Applications to refinance a home mortgage jumped 15.4%. Applications began this month 14.8% above the August average after that month's 19.9% decline.

The effective interest rate on a conventional 15-year mortgage declined to 5.98% following an average of 6.29% last month. For a thirty year mortgage, rates fell to 6.26%. Interest rates on 15 and 30 year mortgages are closely correlated (>90%) with the rate on 10-year Treasury securities. For an adjustable rate 1-Year mortgage the rate fell to 7.08% from 7.22% averaged last month.

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 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.

How Much Have House Prices Fallen? from the Federal Reserve Bank of St. Louis is available here.

MBA Mortgage Applications (3/16/90=100) 09/05/08 08/29/08 Y/Y 2007 2006 2005
Total Market Index 496.2 453.1 -24.5% 652.6 584.2 708.6
  Purchase 371.5 349.0 -17.1% 424.9 406.9 470.9
  Refinancing 1,222.9 1,059.7 -34.8% 1,997.9 1,634.0 2,092.3
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