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Last Week’s Mortgage Applications Were at a 13-Year Low

Written by Gary North on December 26, 2013

A large number of Americans have decided not to borrow to buy a home. Last week, applications fell 6.3%. These figures are seasonally adjusted.

This is in response to rising mortgage rates, which began in May. Since then, home sales have begun to fall. Mortgage applications had been rising for 18 months.

The Federal Reserve’s purchase of almost half a trillion dollars’ worth of mortgage bonds issued by Fannie Mae and Freddie Mac since last December was not the main cause of the decline in mortgage rates. The decline had begun in June 2009. The rise in rates came halfway through the QE3 increase, which began in December 2012. This increase in rates and the accompanying decrease in home sales were independent of the Federal Reserve’s QE3 program.

This statistical fact is rarely mentioned. You can see it here, beginning in June 2009. First, mortgage rates.


Next, the adjusted monetary base, which reveals Federal Reserve monetary policy. Notice that from mid-2011 until December 2012, monetary base growth was flat. It was not QE3 that drove down rates.


This means that the recently announced slight reduction in the FED’s purchase of Fannie/Freddie bonds will not have much affect on the trend of mortgage rates.

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