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Economy in Brief

U.S. Mortgage Applications Rise With Low Interest Rates
by Tom Moeller  March 9, 2011

The Mortgage Bankers Association reported that overall mortgage applications increased 15.5% last week. The jump pulled applications 13.9% above the February average. Nevertheless, applications were up just modestly from nearly the lowest level since 2008. Applications to refinance a mortgage led the increase with a 17.2% w/w gain but still were off nearly one-quarter from one year ago. Since August, applications have fallen by more than one-half and were near the lowest level since August 2009. Applications to purchase a home rose 12.5%. The gain pulled applications 8.3% above February after trending lower since 2007. During the last ten years, there has been a 42% 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 from 61% before 2008.

Applications for fixed interest rate mortgage financing rose 14.9% last week to the highest level this year, but were up just modestly from their lowest in 2009. Applications for variable-rate financing posted a strong 26.1% w/w increase which pulled them to the highest level since December, though they were still off roughly two-thirds from the September peak.

The effective fixed interest rate on conventional 15-year mortgages fell to 4.48% last week, still nearly the highest since early-June and up from the October low of 3.88%. For 30-year mortgages the rate fell to an average 5.19%. 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) 3/4/11 2/25/11 2/18/11 Y/Y % 2010 2009 2008
Total Market Index 514.2 445.1 476.0 -13.8 659.3 736.4 642.9
 Purchase 194.4 172.8 184.1 -14.3 199.8 263.5 345.4
 Refinancing 2,383.7 2,034.7 2,177.2 -20.7 3,348.1 3,509.2 2,394.1
15-Year Mortgage Effective Interest Rate (%) 4.46 4.44 4.48 4.57
4.39 4.85 5.88
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