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Economy in Brief

U.S. Mortgage Applications Move Higher But Purchase Apps Sustain 13-Year Low
by Tom Moeller June 30, 2010

The Mortgage Bankers Association reported that mortgage applications rose again last week by 8.8% to pull the June average up 4.0% from May and up by one-half from June '09. Firm lending activity continued to reflect strong refinancings. Weekly applications for mortgage refinance more-than recovered all of the prior week's decline. So far in June applications are more than one a half times last year's level. 

Applications to purchase a home fell for the second week. For the month so far applications are down 14.8% from May and by 30.3% from April when activity was fueled by the end of the government's tax break. Applications were at their lowest since 1997.  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 slipped again to 4.3% last week. For 30-year mortgages the rate fell slightly to an average 4.86%, near the lowest since the early-1960s. 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 held steady at 7.11%. 

 The drop in interest rates prompted increases in both fixed-rate (51.2% y/y) and adjustable-rate (68.5% y/y) financing.

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

BA Mortgage Applications (SA,3/16/90=100) 06/25/10 06/18/10 06/11/10 Y/Y 2009 2008 2007
Total Market Index 675.9 621.2 659.9 52.0% 736.4 642.9 652.6
Purchase 172.1 177.9 180.0 -35.7 263.5 345.4 424.9
Refinancing 3,613.1 3,208.5 3,461.5 143.8 3,509.2 2,394.1 1,997.9
15-Year Mortgage Effective Interest Rate (%) 4.30 4.44 4.44 5.21(06/09) 4.85 5.9 6.2
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