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 declined 14 basis points since the last week to 5.17% while the purchase application volume dropped 10.5% and the refinance application volume declined 9% over the same period.
It’s important to recognize that now that the Federal Reserve’s mortgage related “quantitative easing” measures are complete, rates appear to be on the rise with the latest data showing the largest weekly jump in the 30 year fixed rate in almost a year.
If rates continue to trend upward, purchase activity will slow despite the efforts of the federal government to incentivize home buying.
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).