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Economy in Brief

U.S. Mortgage Applications Fall as Refinancing Boom Ends

by Tom Moeller January 28, 2009

According to the Mortgage Bankers Association, the total number of mortgage applications fell by more than one-third last week and since their peak two weeks ago are down by almost one-half.  Applications had been boosted by lower interest rates which have risen 25 to 30 basis points on average.

The index of applications to refinance a home mortgage fell by more than one-half during the last two periods.

Applications for a mortgage to purchase a home also fell but the decline only reversed an increase during the prior week. Since their peak early last year applications are down 25%.

The effective interest rate on a conventional 15-year mortgage was roughly stable week-to-week at 5.27% which was up from the low of 4.92% during the week prior. For a 30-year mortgage, rates also were roughly stable w/w at 5.43%, up from the low of 5.13% two weeks ago. Interest rates on 15 and 30 year mortgages are closely correlated (>90%) with the rate on 10-year Treasury securities. For an adjustable 1-Year mortgage, the rate also held about steady for the fourth week at 5.97%, 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 figures for weekly mortgage applications are available in Haver's SURVEYW database.

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 Congressional Budget Office Cost Estimate of the American Recovery and Reinvestment Act of 2009 can be found here

MBA Mortgage Applications (3/16/90=100) 01/23/09 01/16/09 Y/Y 2008 2007 2006
Total Market Index 732.1 1,195.3 -30.6% 642.9 652.6 584.2
  Purchase 294.3 303.1 -18.7% 345.4 424.9 406.9
  Refinancing 3,373.9 6,491.8 -33.9% 2,394.1 1,997.9 1,634.0
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