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Economy in Brief

U.S. Mortgage Applications Decline Further With Elevated Rates
by Tom Moeller  July 10, 2013

The Mortgage Bankers Association reported that total applications for a home mortgage fell 4.0% (-33.3% y/y) last week, extending the decline to 43.6% since early-May. Last week's shortfall reflected a 4.4% drop (-38.4% y/y) in applications to refinance an existing loan. Refinancings were down 53.1% since early May. Home purchase mortgage applications declined 3.1% last week (+4.7% y/y), down 8.6% since early May but up 19.0% since year-end.

Interest rates notched higher with the suggestion that the Fed may soon begin to unwind its recent easing. The effective interest rate on a 15-year mortgage increased w/w to 3.86% from 3.75%, up from the early-May low of 2.89%. The effective rate on a 30-year fixed rate loan increased to 4.81% last week while the rate on a Jumbo 30-year loan rose to 4.97%. The 95 basis point spread between 15- and 30-year loan rates was by far a record. The effective interest rate on an adjustable 5-year mortgage increased to 3.60%, up from its low of 2.59% at the beginning of May.

Applications for fixed interest rate loans fell by 34.8% y/y while adjustable rate loan applications slipped 1.4% y/y. The average mortgage loan size was $214,100. The average size loan for home purchases was $264,200 last week while for refinancings it was $186,000.

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 and interest rates are available in Haver's SURVEYW database. 

What Caused the Decline in Long-term Yields? from the Federal Reserve Bank of San Francisco is available here

MBA Mortgage Applications (SA, 3/16/90=100) 07/05/13 06/28/13 06/21/13 Y/Y% 2012 2011 2010
Total Market Index 533.3 555.5 629.2 -33.3 813.8 572.3 659.3
 Purchase 201.7 208.2 214.8 4.7 187.8 182.6 199.8
 Refinancing 2,454.6 2,568.3 3,041.4 -43.8 4,505.0 2,858.4 3,348.1
15-Year Mortgage Effective Interest Rate (%) 3.86 3.75 3.66 3.23
3.25 3.97 4.39
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