by Calculated Risk on 9/01/2010 07:33:00 AM

The MBA reports: Mortgage Applications Increase as Rates Hit New Low in MBA Weekly Survey

The Refinance Index increased 2.8 percent from the previous week and is at its highest level since May 1, 2009. The seasonally adjusted Purchase Index increased 1.8 percent from one week earlier.
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"Refinancing activity picked up again last week, reaching new 15-month highs, as borrowers took advantage of even lower mortgage rates. The drop in mortgage rates was in line with Treasury rates as the latest data continue to show weak economic growth and an exceptionally weak housing market," said Michael Fratantoni, MBA's Vice President of Research and Economics. "The sharp decline in MBA's Purchase Application index in May had provided a clear leading indicator of the drops in new and existing home sales that were reported for June and July. Despite the slight increase in purchase activity in the past week, the continued low level of purchase applications indicates we are unlikely to see an increase in new home sales reported for August or existing home sales reported for September."
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The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.43 percent from 4.55 percent, with points increasing to 1.34 from 0.89 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The contract rate is a new low for this survey.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 2002.

Usually I start the graph in January 1990, but this shorter term graph shows that the purchase index has been moving sideways since May of this year.

As the MBA's Fratantoni noted, this suggests existing home sales in August and September will be around the same level as in July.