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Economy in Brief

U.S. Mortgage Applications Continue Lower As Interest Rates Surge
by Tom Moeller  June 26, 2013

The Mortgage Bankers Association reported that total applications for a home mortgage fell 3.0% w/w, extending the declines of the prior six weeks. The latest level was down by one-third since early-May. Last week's decline reflected a 5.2% drop (-38.4% y/y) in applications to refinance an existing loan. Refinancings were down 41.8% since early May. Home purchase mortgage applications increased 2.1% last week (15.9% y/y), up 26.7% since year end.

Evidence of a firming economy is raising interest rates. The effective interest rate on a 15-year mortgage jumped w/w to 3.66% from 3.30%, up from the early-May low of 2.89%. The effective rate on a 30-year fixed rate loan increased to 4.57% last week while the rate on a Jumbo 30-year loan was 4.60%. The 91 basis point spread between 15- and 30-year loan rates was a record. The effective interest rate on an adjustable 5-year mortgage increased to 3.20%, up from its low of 2.59% at the beginning of May.

Applications for fixed interest rate loans fell by 30.3% y/y while adjustable rate loan applications rose 20.0% y/y. The average mortgage loan size was $222,500. The average size loan for home purchases was $266,800 last week while for refinancings it was $201,000.

The survey covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990.  Respondents include mortgage bankers, commercial banks and thrifts.  Base period and value for all indexes is March 16, 1990=100.
The figures for weekly mortgage applications are available in Haver's SURVEYW database. 

Why Financial Stability is a Necessary Prerequisite for an Effective Monetary Policy from the Federal Reserve Bank of New York can be found here.

MBA Mortgage Applications (SA, 3/16/90=100) 06/21/13 06/14/13 06/07/13 Y/Y% 2012 2011 2010
Total Market Index 629.2 648.9 670.7 -28.1 813.8 572.3 659.3
 Purchase 214.8 210.4 217.0 15.9 187.8 182.6 199.8
 Refinancing 3,041.4 3,208.5 3,322.3 -38.4 4,505.0 2,858.4 3,348.1
15-Year Mortgage Effective Interest Rate (%) 3.66 3.30 3.32 3.22
3.25 3.97 4.39
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