Mortgage Rates: Preparing for the Post QE2 Era

by: Sold At The Top

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50% of all residential mortgage originations. The survey 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 declined 11 basis points to 4.58% since last week while the purchase application volume went flat and the refinance application volume declined 5.7% over the same period. Rates now appear to be trending down having, more of less, declined continually for the last four months.

Given that we are nearing the end of the Fed's QE2 intervention, it will be interesting to see how long rates trend in the next few months. In any event, the purchase application volume remains near the lowest level seen in well over a decade while refinance activity continues to slow.

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 (click for larger dynamic full-screen version).