Reading Rates: MBA Application Survey

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages, 1 year ARMs as well as application volume for 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 increased since last week jumping to 5.31% while the purchase application volume increased 1.28% and the refinance application volume increased 4.0% compared to last week’s results.

It’s important to recognize that while the Federal Reserve’s “quantitative easing” measures held down rates for a time and spurred a notable boom in refinance activity, the recent activity appears to have come to a close.

Even with historically low lending rates both refinance and purchase application volume look to be headed back to the lows of the fall of 2008 and an overall declining trend.

The following chart shows how the principle and interest cost and estimated annual income required to cover the PITI (using the 29% “rule of thumb”) on a $400,000 loan has changed since November 2006.

click to enlarge
The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages over the last number of weeks.

The following charts show the Purchase Index, Refinance Index and Market Composite Index since November 2006.

Comments

[Wesley Mouch:]

The title of this article is "Reading Rates: MBA Application Survey". I was hoping that the article was going to address the literacy rate of those applying for degrees in Master's in Business Administration. I think there is something worth reporting here.

You see, the MBA degree is a very important, and requires a degree of rigor most of us non MBA types can't even understand. The candidates that are admitted to the top programs are either:

1. Really smart, qualified students who should lead the business world.
2. Really good test takers who have mastered the GMAT material.
3. Legacy candidates whose parents attended the program (I kid you not, this is a question asked on the application)
4. Underserved student populations whose admittance improves the "blend" of the class.

Regardless, our business culture hands the newly minted MBA's the keys to the castle. I don't know if we non-MBA taxpayers have the collective resources to try to sort through Categories 1-4 above with bailouts to try to find Category 1 leaders. I do know that we are going to try, though.

Jul 22 12:54 PM

[John Preston:]

Actually quite on point.....the comments at least, by Mr. Mouch....I always felt that MBA stood for "More Bad Advice".....

Jul 23 12:23 PM