U.S. Weekly Mortgage Applications Rise

The total number of mortgage applications recovered last week after three consecutive weeks of decline, reported the Mortgage Bankers Association. The 11.3% increase nevertheless left applications 45.4% below the peak reached this past January when applications were boosted by the precipitous decline in interest rates to near the lows of 2003.

The index of applications to refinance a home mortgage recovered 13.3% last week and that reversed nearly all of the prior period's 15.3% decline. While these applications are down by one-half from their January high, the trend still is up due to the decline in interest rates.

Applications for a mortgage to purchase a home also rose last week. The 7.1% increase was enough to recover nearly all of the decline during the prior two weeks. The falloff in home sales continued, however, to pull purchase applications sharply lower. Since their peak early last year these applications are down nearly 50%.

The effective interest rate on a conventional 15-year mortgage fell week-to-week to 4.84%. That was near the lowest level since 2003 after which home sales surged. For a 30-year mortgage, rates held near their recent lows at 5.19%. Interest rates on 15- and 30-year mortgages are closely correlated (>90%) with the rate on 10-year Treasury securities. For an adjustable 1-Year mortgage, the rate ticked up slightly week-to-week to 6.25% but the rate still was down sharply from the 7.07% peak reached this past Fall.

During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage. Moreover, during the last ten years there has been a 61% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.

The figures for weekly mortgage applications are available in Haver's SURVEYW database.

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. Visit the Mortgage Bankers Association site here.

The Affordability of Homeownership to Middle-Income Americans from the Federal Reserve Bank of Kansas City can be found here.