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Economy in Brief

U.S. Weekly Mortgage Applications Rise Overall But Purchases Slacken
by Tom Moeller November 12, 2009

The Mortgage Bankers Association indicated that mortgage applications rose 3.2% last week and remained up by nearly one-half from last year. But the overall figure masks conflicting trends between mortgage applications for purchase (down) and for refinance (up).

Applications to purchase a home fell hard for the fifth consecutive week and they are down by one-quarter during the period. The decline, no doubt, partially reflects the expiration of an up-to $8,000 Federal tax credit for first-time homebuyers. The credit, however, was recently extended to April of next year. During the last ten years there has been a 51% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales. The correlation has lessened recently. Applications to refinance mortgages rose solidly last week and were up by one-half from the June low due to declines in interest rates.

The effective interest rate on conventional 15-year mortgages fell last week to 4.61% which is near the recent low and down from the June average of 5.21%. For 30-year mortgages, the rate also fell last week to 5.11% after reaching a high of 5.79% in early-June. Interest rates on 15-year and 30-year mortgages are closely correlated (>90%) with the rate on 10-year Treasury securities. Rates on adjustable one-year mortgages rose to 6.94% last week which was the highest level since November of last year.

During the last twelve months, the number of fixed-rate mortgage applications has risen 43.0% while the number of adjustable-rate mortgage applications has roughly tripled.

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.

Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States, 1967–2006 from the Federal Reserve Bank of Minneapolis can be found here.

MBA Mortgage Applications (SA, 3/16/90=100) 11/06/09 10/30/09 Y/Y 2008 2007 2006
Total Market Index 627.5 608.3 47.6% 642.9 652.6 584.2
  Purchase 220.9 250.3 -22.3 345.4 424.9 406.9
  Refinancing 2,998.2 2,693.7 140.2 2,394.1 1,997.9 1,634.0
15-Year Effective Interest Rate (%) 4.61% 4.67% 5.98% (11/08) 5.9% 6.2% 6.3%
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