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Economy in Brief

U.S. Mortgage Applications To Refinance Are Firm With Record Low Interest Rates
by Tom Moeller  June 22, 2011

Overall mortgage applications fell 5.9% last week. However, since the decline followed a 13.0% increase during the week prior, applications for the month so far have risen 5.3% from May. Applications to refinance a mortgage led that increase. Though they fell 7.2% last week, June's level is up 8.5% from May. Working the other way, applications to purchase a home fell 2.8% w/w and for the month are down 2.6% from May. 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.

Locking in a low interest rate is borrowers' current emphasis. Applications for fixed interest rate mortgage financing fell last week, but for the month have risen 5.5% following May's 14.5% jump. Applications for variable-rate financing have risen a somewhat lesser 2.6% in June after May's 11.5% increase.

The effective fixed-interest rate on conventional 15-year mortgages was a low 3.96% last week, near the record low of 3.88% reached last October. For 30-year mortgages, the rate was 4.75%. 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.

TIPS Liquidity, Breakeven Inflation, and Inflation Expectations is from the Federal Reserve Bank of San Francisco and it can be found here.

BA Mortgage Applications (SA, 3/16/90=100) 6/17/11 6/10/11 6/3/11 Y/Y % 2010 2009 2008
Total Market Index 549.9 584.6 517.5 -11.5 659.3 736.4 642.9
 Purchase 185.8 191.1 182.9 4.4 199.8 263.5 345.4
 Refinancing 2,675.2 2,883.7 2,475.7 -16.6 3,348.1 3,509.2 2,394.1
15-Year Mortgage Effective Interest Rate (%) 3.96 3.94 3.93 4.42
4.39 4.85 5.88
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