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Economy in Brief

U.S. Mortgage Applications Fell Slightly Last Week
by Tom Moeller December 10, 2008

According to the Mortgage Bankers Association, the total number of mortgage applications fell a slight 7.1% last week. They had doubled during the prior week to take advantage of lower interest rates and the Fed's announcement that it would buy the debt of government sponsored enterprises (GSEs) and mortgage-backed securities (MBSs).

The Future of Mortgage Finance in the United States is Fed Chairman Bernanke's 10/31/08 speech and it can be found here.

The index of applications to refinance a home mortgage slipped 0.9% last week after having tripled due to the government's guarantee.

Applications for a mortgage to purchase a home retraced most of the prior week's gain with a 17.4% w/w decline.

The effective interest rate on a conventional 15-year mortgage dipped after having plummeted during the week prior. The decline to 5.40% left them down nearly a full percentage point from the October average. For a 30-year mortgage rates also fell slightly to 5.69%. 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 rose to 6.83% after having averaged 6.90% during November.

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. Moreover, 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.

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.

The figures for weekly mortgage applications are available in Haver's SURVEYW database.

MBA Mortgage Applications (3/16/90=100) 12/05/08 11/28/08 Y/Y 2007 2006 2005
Total Market Index 796.8 857.7 -1.8% 652.6 584.2 708.6
  Purchase 298.1 361.1 -36.8% 424.9 406.9 470.9
  Refinancing 3,767.3 3,802.8 30.8% 1,997.9 1,634.0 2,092.3
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