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Economy in Brief

U.S. Mortgage Applications and Interest Rates Retreat
by Tom Moeller  April 27, 2011

The Mortgage Bankers Association reported that overall mortgage applications fell 5.6% last week and reversed the prior week's gain. The latest was the lowest level since early-February. Applications to purchase a home fell 13.6% w/w. During the last ten years, there 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 to refinance slipped marginally w/w and they remained off by roughly one-half from the peak last August.

Applications for fixed interest rate mortgage financing fell 5.6% last week (-17.9% y/y) and remained off nearly one-half from the August peak. Applications for variable-rate financing fell 6.2% (-11.3% y/y).

The effective fixed interest rate on conventional 15-year mortgages fell to 4.27%, the lowest level in five weeks. For 30-year mortgages, the rate fell to 5.00%. 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.

BA Mortgage Applications (SA, 3/16/90=100) 4/22/11 4/15/11 4/8/11 Y/Y % 2010 2009 2008
Total Market Index 441.2 467.5 444.0 -17.5 659.3 736.4 642.9
 Purchase 182.1 210.8 191.7 -29.4 199.8 263.5 345.4
 Refinancing 1,964.0 1,975.2 1,923.9 -9.1 3,348.1 3,509.2 2,394.1
15-Year Mortgage Effective Interest Rate (%) 4.27 4.33 4.48 4.63
4.39 4.85 5.88
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