Lower interest rates continued to spur mortgage applications last week, according to the Mortgage Bankers Association. Overall, mortgage applications jumped another 7.6% last week. That raised applications 15.2% from June and 42.5% from July '09.

Firm lending activity continued to reflect strong refinancings. Applications for mortgage refinance jumped 8.6% w/w and 21.1% for the month versus June. The level was the highest since May of last year. Conversely, applications to purchase a home remained weak. They recovered the prior week's decline with a 3.4% increase but still were near the lowest level since early-1997. 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.

The effective fixed interest rate on conventional 15-year mortgages slipped further to 4.27% last week. For 30-year mortgages the rate also slipped to an average 4.80%, near the lowest since the early-1960s. Interest rates on fixed 15-year and 30-year mortgages are closely correlated (near-90%) with the rate on 10-year Treasury securities. Rates on adjustable one-year mortgages held roughly steady w/w at 7.23% versus 6.74% at the end of last year. 

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.

Mortgage Prepayments and Changing Underwriting Standards from the Federal Reserve Bank of San Francisco is available here.