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Economy in Brief

U.S. Mortgage Applications Decline As Interest Rates Rise
by Tom Moeller  February 9, 2011

The Mortgage Bankers Association reported that overall mortgage applications fell 5.5% last week and reversed the prior week's increase. The decline left applications near the lowest level since 2008. Applications to refinance a mortgage led the drop with a 7.7% w/w decline and were off more than one-quarter from one year ago. Since August, applications have fallen by more than one-half to the lowest level since August 2009. Applications to purchase a home drifted down 1.4% following a month-end recovery in January. Nevertheless, applications have fallen 11.8% since early-December and were down one-third from the 2009 peak.. During the last ten years, the has been a 42% 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 from 61% before 2008.

Applications for fixed interest rate mortgage financing fell 5.9% last week and remained near the lowest since 2009. Applications for variable-rate financing have risen during the last two weeks but were off two-thirds from the September peak.

The effective fixed interest rate on conventional 15-year mortgages rose sharply to 4.54% last week. The latest was near the highest level since late-May and up from the October low of 3.88%. For 30-year mortgages the rate rose to an average 5.30%. 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. The figures for weekly mortgage applications are available in Haver's SURVEYW database.

The Economic Outlook and Monetary and Fiscal is today's House testimony by Fed Chairman Ben S. Bernanke and it can be found here.

BA Mortgage Applications (SA, 3/16/90=100) 2/4/11 1/18/11 1/21/11 Y/Y % 2010 2009 2008
Total Market Index 464.7 491.7 441.8 -24.2 659.3 736.4 642.9
 Purchase 186.1 188.7 172.3 -15.9 199.8 263.5 345.4
 Refinancing 2,086.4 2,261.2 2,025.2 -27.9 3,348.1 3,509.2 2,394.1
15-Year Mortgage Effective Interest Rate (%) 4.54 4.38 4.43 4.61
4.39 4.85 5.88
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