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The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50% of all residential mortgage originations. It also tracks the average interest rate for 30-year and 15-year fixed-rate mortgages and the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series. That's because it very broadly captures the demand side of residential real estate for both new- and existing-home purchases.

The latest data is showing that the average rate for a 30-year fixed-rate mortgage (from FHA and conforming GSE data) decreased 1 basis point, to 3.44%, since last week. The purchase application volume increased 3%, and the refinance application volume declined 2% over the same period. Clearly, the Federal Reserve's QE3 announcement and implementation has had a notable effect on mortgage rates in recent weeks, continuing to lift refinance application activity and possibly helping to establish a base of sorts to purchase applications.

The question, though, is: If the Fed is stimulating this activity by forcing artificially low rates, what would these trends look like if prevailing rates were based on a more fundamental market function? The following charts shows the average interest rate for 30-year and 15-year fixed-rate mortgages since 2006 as well as the purchase, refinance, and composite loan volumes.

Source: Reading Rates: MBA Application Survey - Nov. 28, 2012