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 7 basis points to 3.57% since last week, while the purchase application volume declined 2% and the refinance application volume declined 10% 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 is, though, 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.