Today the Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey which showed that the Market Composite Index, a measure of mortgage loan application volume, increased 7.5 % for the week ending on February 3. In the meantime, mortgage rates fell to their lowest level since the Survey began. It measures 75% of the national weekly loan application volume for residential mortgage applications and has been conducted since 1990.
Mortgage Application Volume Increases: Refinancing applications led the way, with a 9.4% increase over the previous week’s volume; refinancing activity represented 80.5% of the total mortgage applications, a small increase from 80.0% the previous week. The rate of refinancing also increased – after a sharp decrease in November and December. Applications for new purchases increased only 0.1% — which was 4.1% lower than the same week in 2011. Over the past four-week period, applications for new purchases were up 0.7%. Adjustable Rate Mortgages (ARMs) represented 6.0% of the total applications, a small increase compared to 5.6% the previous week.
Mortgage Rates Decline: The week also saw a decline in the rate for 30-year-fixed mortgages on conforming loans (those under $417,500) to 4.05% compared with 4.09% the previous week. This is the lowest rate in the history of the survey. The average for a 30-year-fixed mortgage in February 2011 was 5.05%. The average rate for 30-year-fixed jumbo mortgages (for amounts over $417,500) declined to 4.29%. Average rates for 15-year-fixed mortgages declined to 3.33% and 5/1 ARMs went down to 2.91% — compared to 3.36% and 2.94% respectively for the previous week.
Why Consumers Care: The MBA Weekly Mortgage Applications Survey is a leading indicator of the health of the real estate market and the economy in general since people only buy houses when they are feeling confident in their financial situation. Investments in homes also have a ripple effect in the economy, having a positive impact on diverse goods and services such as construction, landscaping, appliances, and furniture.
Such indicators are used to guide investors when they’re making decisions about how to invest their money. The MBA Weekly Mortgage Applications Survey is particularly useful in predicting the stock values for mortgage companies, home construction, and home-related goods and services. While homeowners who are refinancing do not have as big an impact, the money they save on mortgage payments can be used to buy other products and services, giving a boost to the economy.