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Economy in Brief

Mortgage Applications For Refinancing Plummet As Rates Rise
by Tom Moeller   December 08, 2010

The Mortgage Bankers Association reported that a 0.9% w/w downtick in mortgage applications after a $16.5B plunge lowered them to the lowest since June. Last week's total decline reflected a 1.4% w/w drop in applications to refinance a mortgage. Applications to purchase a home increased 1.8%, leaving them up roughly one-quarter from the July low. 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 rose to 4.23% last week with selling in the Treasury market. It was the highest level since late-August. For 30-year mortgages the rate also rose to an average 4.85%, still nearly 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.

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) 12/03/10 11/26/10 11/199/10 Y/Y % 2009 2008 2007
Total Market Index 603.5 608.8 728.8 -9.3 736.4 642.9  652.6
 Purchase 210.9 207.2 205.0 -12.7 263.5 345.4 424.9
 Refinancing 2,932.9 2,974.4 3,793.6 -8.0 3,509.2 2,394.1 1,997.9
15-Year Mortgage Effective Interest Rate 4.23 4.13 4.09 4.62
4.85 5.9 6.2
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