The total number of mortgage applications ticked up 3.6% last week after two weeks of sharp decline which left the average level of applications in December up 1.1% versus the prior month, according to the Mortgage Bankers Association.

Purchase applications rose 4.3% following two weeks of sharp decline but increased 4.7% during the month from the November average which rose 6.4% from the October level.

During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.

Applications to refinance also ticked up 2.2% after two weeks of double digit decline which gave back more than all some earlier increases. In December applications to refinance were unchanged on average from November.

The effective interest rate on a conventional 30-year mortgage increased again w/w to 6.40%, the highest level since early November. Nevertheless rates averaged 6.28% in December, down versus 6.36% during November. The peak for 30 year financing was 7.08% late in June. Rates for 15-year financing also increased to 6.18% and averaged 6.05% last month versus 6.13% during November. Interest rates on 15 and 30 year mortgages are closely correlated (>90%) with the rate on 10 year Treasury securities.

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.

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.