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Economy in Brief

U.S. Mortgage Applications Fell Slightly Last Week
by Tom Moeller January 7, 2009

According to the Mortgage Bankers Association, the total number of mortgage applications fell a slight 8.2% last week after having been unchanged during the prior week. Nevertheless, applications remained firm to take advantage of lower interest rates and the Fed's announcement that it would buy the debt of government sponsored enterprises (GSE) and mortgage-backed securities (MBS).They are up by more than from the year ago level.

The index of applications to refinance a home mortgage dipped for the second week after having risen by two-thirds near the end of last month. They have risen by three times due to lower interest rates and the government's guarantee.

Applications for a mortgage to purchase a home rose for the third consecutive week and were up by one third from their November low.

The effective interest rate on a conventional 15-year mortgage fell again to 4.96% and that left rates down 140 basis points from the October average. For a 30-year mortgage rates also fell to 5.30%. 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 5.98%, down a full percentage point from this past Fall

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) 01/02/09 12/26/08 Y/Y 2008 2007 2006
Total Market Index 1,143.8 1,245.7 62.0% 642.9 652.6 584.2
  Purchase 344.2 320.9 -16.9% 345.4 424.9 406.9
  Refinancing 5,904.5 6,733.8 136.7% 2,394.1 1,997.9 1,634.0
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