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Economy in Brief

U.S. Mortgage Applications Remain High With Lower Rates
by Tom Moeller  May 25, 2011

The Mortgage Bankers Association reported that overall mortgage applications increased another 1.1% last week following several months of strong gain. Applications to refinance a mortgage ticked up 0.9% w/w to the highest level since mid-December. Applications to purchase a home rose 1.5% w/w but have moved erratically sideways of late. 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 1.6% last week (-14.5% y/y) but remained off nearly one-half from the August peak. Applications for variable-rate financing fell 6.6% (-17.3% y/y).

The effective fixed interest rate on conventional 15-year mortgages slipped to 4.04%, the lowest level since November. For 30-year mortgages, the rate ticked up to 4.83%. 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) 5/20/11 5/13/11 5/6/11 Y/Y % 2010 2009 2008
Total Market Index 540.8 534.8 496.3 -14.6 659.3 736.4 642.9
 Purchase 191.4 188.6 194.9 +3.1 199.8 263.5 345.4
 Refinancing 2,591.7 2,568.2 2,269.1 -6.7 3,348.1 3,509.2 2,394.1
15-Year Mortgage Effective Interest Rate (%) 4.04 4.06 4.08 4.52
4.39 4.85 5.88
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