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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 and tracks the average interest rate for 30-year and 15-year fixed-rate mortgages, as well as the volume of both purchase and refinance applications. The purchase application index has been highlighted as a particularly important data series as 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) increased 5 basis point to 3.63% since last week, while the purchase application volume increased 2% and the refinance application volume increased 4% 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.

However, the question 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 chart 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 - Feb. 5, 2013