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 decreased 52 basis points since last week to 5.47% while the purchase application volume jumped 38% and the refinance application volume increased a whopping 203.3% compared to last week’s results.
It’s important to note that although the steady decline in rates has likely played a significant role in the large increases in refinance and purchase application volume, it’s also altogether possible that the MBAA has some difficulty in seasonally adjusting their numbers around the November and December periods.
As you can see on the charts below, November through January usually brings some erratic spikes to the volume indices but the cause, at least in some part, is likely the result of troubles seasonally adjusting a noisy weekly series during the holiday season and not an actual spontaneous doubling of refinance activity.
As was noted last year, it’s probably sensible to wait until February to draw a final conclusion.
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.
The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages over the last number of weeks (click for larger version).
The following charts show the Purchase Index, Refinance Index and Market Composite Index since November 2006 (click for larger versions).