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Economy in Brief

U.S. Weekly Mortgage Applications Jump Higher As Refi's More Than Double
by Tom Moeller April 8, 2009

The Mortgage Bankers Association reported another increase in mortgage applications. The 4.7% w/w increase last week pulled them up by nearly three-quarters from the year ago level and to nearly their highest for this year.

Fueled by lower interest rates, the index of applications to refinance a home mortgage again rose. The moderate 3.2% w/w increase pulled them up by more than double the year ago level.

Returning to the 2003 low, the effective interest rate on a conventional 15-year mortgage fell to 4.73% week-to-week. For a 30-year mortgage, rates held near their recent lows at 4.93%. 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 has been fairly stable this year near 6.25% but the rate still was down sharply from the 7.07% peak reached this past Fall.

Mortgage applications for purchase also rose last week, but the 11.5% w/w gain still left them down by one-quarter from last year. Nevertheless, some sign of life in home purchases may be evident in a 25% increase in applications from the absolute lows of this past February. That life, however, has yet to translate into material gains in the home sales figures. Sales of new plus existing single family homes in February only recovered a sharp January decline. They remained near the cycle low and near the lowest since 1997.

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. 

Recession or depression? from the Federal Reserve Bank of St. Louis is available here.

Explaining trends in wages, work and occupations from the Federal Reserve Bank of Chicago can be found here

MBA Mortgage Applications (3/16/90=100) 04/03/09 03/27/09 Y/Y 2008 2007 2006
Total Market Index 1,250.6 1,194.4 72.4% 642.9 652.6 584.2
  Purchase 297.7 268.0 -22.6% 345.4 424.9 406.9
  Refinancing 6,813.5 6,600.1 150.1% 2,394.1 1,997.9 1,634.0
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