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Economy in Brief

U.S. Mortgage Applications Reach One-Year Low As Rates Remain High
by Tom Moeller  December 22, 2010

The Mortgage Bankers Association reported that overall mortgage applications plunged 18.6% last week to the lowest since early this year. The decline was led by a 24.6% weekly drop in applications to refinance a mortgage. Applications to purchase a home fell moderately during the last two week's, leaving them up 17.6% from the July low. 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 ticked up to 4.54% last week. It was the highest level since late-May and up from the October low of 3.88%. For 30-year mortgages the rate also rose to an average 5.04%. Interest rates on fixed 15-year and 30-year mortgages are closely correlated (near-90%) with the rate on 10-year Treasury securities.

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.

BA Mortgage Applications (SA, 3/16/90=100) 12/17/10 12/10/10 12/03/10 Y/Y % 2009 2008 2007
Total Market Index 479.9 589.7 603.5 -19.5 736.4 642.9 652.6
 Purchase 195.3 200.3 210.9 -8.4 263.5 345.4 424.9
 Refinancing 2,196.1 2,910.9 2,932.0 -24.0 3,509.2 2,394.1 1,997.9
15-Year Mortgage Effective Interest Rate 4.54 4.53 4.23 4.64
4.85 5.9 6.2
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