The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending March 4 2011. 

The MBA's loan application survey covers over 50% of all U.S. residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts. The data gives economists a snapshot view of consumer demand for mortgage loans. In a falling mortgage rate environment, a trend of increasing refinance applications implies consumers are seeking out lower monthly payments. If consumers are able to reduce their monthly mortgage payment and increase disposable income through refinancing, it can be a positive for the economy as a whole (may boost consumer spending. Also allows debtors to pay down personal liabilities faster). A trend of declining purchase applications implies home buyer demand is shrinking.

Excerpts from the Release...

The Market Composite Index, a measure of mortgage loan application volume, increased 15.5 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 16.1 percent compared with the previous week.  

The Refinance Index increased 17.2 percent from the previous week and was the highest Refinance Index observed since the week ending January 14, 2011.  The four week moving average is up 3.6 percent. The refinance share of mortgage activity increased to 65.5 percent of total applications from 64.9 percent the previous week.

IMPORTANT NOTE: The previous week's data did not include a holiday adjustment for Presidents' Day,  the week over week percentage rebound we are seeing today was likely overstated as a result.

The seasonally adjusted Purchase Index increased 12.5 percent from one week earlier and was the highest Purchase Index recorded this year. The unadjusted Purchase Index increased 14.3 percent compared with the previous week and was 14.3 percent lower than the same week one year ago. The four week moving average is up 1.2 percent for the seasonally adjusted Purchase Index.

The average contract interest rate for 30-year fixed-rate mortgages increased to 4.93 percent from 4.84 percent, with points decreasing to 0.87 from 1.29 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.  The effective rate also increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 4.17 percent, with points increasing to 1.15 from 1.07 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week.

"Taking into account typical seasonal patterns, purchase applications rose to their highest level of the year last week.  On an unadjusted basis, purchase application activity is the highest since last May," said Michael Fratantoni, MBA's Vice President of Research and Economics.  "An improving job market is beginning to pave the way for an improving housing market.  Additionally, mortgage interest rates remained below 5 percent for a second week, maintaining affordability for buyers and leading to an increase in refinance applications."