Global| May 26 2010U.S. Mortgage Refinance Applications Surge With Lower Rates
by:Tom Moeller
|in:Economy in Brief
Summary
Lower interest rates are encouraging mortgage refinancings, but not so much new home purchases. The Mortgage Bankers Association reported that mortgage applications jumped last week and for May they've risen 11.5% from April. The May [...]
Lower interest rates are encouraging mortgage refinancings, but not so much new home purchases. The Mortgage Bankers Association reported that mortgage applications jumped last week and for May they've risen 11.5% from April. The May increase, however, just made up an April decline.
Mortgage refinancings jumped for the third consecutive week to the highest level since last October. Conversely, applications to purchase a home dropped sharply with the expiration of the Federal tax credit for home purchase. During the last ten years there has been a 51% 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.
The effective fixed interest rate on conventional 15-year mortgages averaged 4.50% during the latest week, the cycle low. For 30-year mortgages the rate also fell to an average 5.02%. Interest rates on fixed 15-year and 30-year mortgages are closely correlated (near-90%) with the rate on 10-year Treasury securities. Rates on adjustable one-year mortgages rose during the month to 6.93%, its highest since mid-2008.
| BA Mortgage Applications (SA, 3/16/90=100) | 05/21/10 | 05/14/10 | 05/07/10 | Y/Y | 2009 | 2008 | 2007 |
|---|---|---|---|---|---|---|---|
| Total Market Index | 633.5 | 569.2 | 578.1 | -19.4% | 736.4 | 642.9 | 652.6 |
| Purchase | 185.7 | 192.1 | 263.6 | -27.6 | 263.5 | 345.4 | 424.9 |
| Refinancing | 3,257.4 | 2,783.0 | 2,430.8 | -16.3 | 3,509.2 | 2,394.1 | 1,997.9 |
| 15-Year Mortgage Effective Interest Rate (%) | 4.50 | 4.53 | 4.52 | 4.82 (05/09) | 4.85 | 5.9 | 6.2 |
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.
More Economy in Brief
