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 simply exploded jumping 32 basis points to 5.13% since last week, the highest level seen since April 2010, while the purchase application volume declined 1.4% and the refinance application volume slumped 7.7% over the same period.
It's important to note that rates have been, more or less, trending up for about four months now and coincidentally somewhat in-line with the Fed making QE2 official.
While early scuttlebutt about QE2 measures worked to depress mortgage rates in early 2010, it appears that its actual implementation is having the reverse effect resulting in continued poor trends for purchase and refinance activity.
Now it appears more likely that QE2 worked to improve confidence or at least created the perception that the Fed will stop at nothing to prop the ailing stock market and, in turn, the entire macro-economy.
Thus improvements in equity prices and macro-trends are now coming in-line with a notable increases in lending rates.
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 as well as one year ARMs since 2006 (click for larger dynamic full-screen version).
The following dynamic charts show the Purchase Index, Refinance Index and Market Composite Index since 2006 (click for larger versions).