Global| Jul 20 2011Lower U.S. Interest Rates Generate Mortgage Refinancing
by:Tom Moeller
|in:Economy in Brief
Summary
Overall mortgage applications jumped 15.5% last week. The gain followed four weeks of decline. Remaining strong were applications to refinance which jumped nearly one-quarter w/w, also after four weeks of decline. Working the other [...]
Overall mortgage applications jumped 15.5% last week. The gain followed four weeks of decline. Remaining strong were applications to refinance which jumped nearly one-quarter w/w, also after four weeks of decline. Working the other way, applications to purchase a home slipped w/w and were near the lowest since February. During the last ten years, there has been an 81% correlation between the level of purchase applications and new plus existing single family home sales.
The effective fixed-interest rate on conventional 15-year mortgages fell to the record low of 3.90% last week. As the yield curve has steepened, so too has the mortgage interest rate spread. For 30-year mortgages, the rate was 4.74% and the spread versus 15-year mortgages was a record. Interest rates on fixed 15-year mortgages are closely correlated (near-90%) with the rate on 10-year Treasury securities. At 7.19%, interest on variable rate financing held near the highest level since April.
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.
Do Banking Shocks Matter For The U.S. Economy? from the Federal Reserve Bank of Dallas is available here.
| BA Mortgage Applications (SA, 3/16/90=100) | 7/15/11 | 7/8/11 | 7/1/11 | Y/Y % | 2010 | 2009 | 2008 |
|---|---|---|---|---|---|---|---|
| Total Market Index | 556.0 | 481.3 | 507.0 | -26.2 | 659.3 | 736.4 | 642.9 |
| Purchase | 183.7 | 183.9 | 188.9 | 12.0 | 199.8 | 263.5 | 345.4 |
| Refinancing | 2,728.6 | 2,217.3 | 2,363.6 | -34.4 | 3,348.1 | 3,509.2 | 2,394.1 |
| 15-Year Mortgage Effective Interest Rate (%) | 3.90 | 3.96 | 4.01 | 4.32 (7/10) |
4.39 | 4.85 | 5.88 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
