The Mortgage Bankers Association indicated that mortgage applications overall increased 5.6% last week; however, that only made up for a 3.5% decline during the prior period. Together, the latest figures left applications for all of August up 0.6% from July after that month's 3.7% decline. Applications still remained near the lowest level since last November.

There has been some life in purchase applications, but it's hardly vibrant. Applications rose 3.9% last week after a 1.1% increase during the prior period. Together the gains lifted applications for the month so far by 2.2% from July when applications fell 1.3% m/m. Nevertheless since the early-February low, purchase applications have risen 15% as new and existing home sales have recovered.

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.

Interest in mortgage refinancing has been stifled of late by the rise in interest rates. Applications to refinance made up merely the prior week's decline with a 6.9% increase. So far in August, applications are 0.8% lower than July and near the lowest level since November. Since their peak in January, refinance applications have fallen by three-quarters.

Since the beginning of this year, fixed-rate mortgage applications have fallen by slightly more than one-half while adjustable-rate mortgages have doubled. The number of conventional loans has fallen nearly two-thirds while gov't backed loans have fallen by more than one-third.

The earlier rise in mortgage interest rates has stabilized, for the moment. The effective interest rate on a conventional 15-year mortgage fell last week to 4.76% and for the month averaged 4.89%. These figures are up from the April low of 4.69% but the rate had reached a high of 5.36% in early-June. For a 30-year mortgage, the rate also fell last week to 5.35% after reaching a high of 5.79% in early-June.< Interest rates on 15- and 30-year mortgages are closely correlated (>90%) with the rate on 10-year Treasury securities. Rates on adjustable 1-Year mortgages averaged 6.71% this month versus the low near 6.0% during January. Nevertheless, the rate remained down from the 7.07% peak reached last fall.

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.

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