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Economy in Brief

Mortgage Applications Surge Spurred By Higher Refinancings
by Tom Moeller   October 13, 2010

The Mortgage Bankers Association reported that mortgage applications surged by 14.6% last week to the highest level since May 2009. Last week's total increase was led by a 21.0% w/w jump in applications to refinance a mortgage. They were up by one-half versus last year with the decline in interest rates. Applications to purchase a home fell 8.5% and reversed the prior week's increase. That left applications off by roughly one-third from last year at the lowest level since 1995. 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 fell to 3.88% last week. For 30-year mortgages the rate fell to an average 4.41%, 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 ticked down w/w to 7.10% 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.

BA Mortgage Applications (SA,3/16/90=100) 10/08/10 10/01/10 09/24/10 Y/Y % 2009 2008 2007
Total Market Index 897.2 782.6 784.0 20.8 736.4 642.9 652.6
 Purchase 181.8 198.7 181.8 -37.5 263.5 345.4 424.9
 Refinancing 5,060.3 4,180.8 4,288.3 50.0 3,509.2 2,394.1 1,997.9
15-Year Mortgage Effective Interest Rate (%) 3.88 4.01 4.05 4.68
4.85 5.9 6.2
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