Market Composite Index & Mortgage Rates Fall on Eve of Bernanke Speech

by Chicago Agent


Though mortgage interest rates fell last week, the MBA’s Market Composite Index still declined, though both could be affected by an upcoming speech from Ben Bernanke.

By Peter Ricci

Now this is interesting – after a solid month of rising interest rates impacting the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey, fixed mortgage rates fell in Freddie Mac’s latest survey; yet, mortgage applications in the MBA’s most recent survey still declined.

Overall, the Market Composite Index, a measure of mortgage loan application volume, was down 4.3 percent last week, and on an unadjusted basis, it fell 5 percent. The Refinance Index, meanwhile, decreased 6 percent, and refinancing’s share of total mortgage activity also fell from 80 percent to 79 percent.

Market Composite Index and Consumer Attitudes

The interesting thing about the Market Composite Index, as previously stated, is that its declines came as mortgage rates also fell; rates had increased the previous four weeks, and the economic consensus had been that those increases were why mortgage applications were down. According to Freddie Mac, rates for last week were:

  •  The 30-year FRM fell from 3.66 percent to 3.59 percent, and is down considerably from the 4.22 percent of a year ago.
  • The 15-year FRM also declined, falling from 2.89 percent to 2.86 percent; last year at this time, it was 3.39 percent.
  • On the adjustable side of things, the 5-year ARM averaged 2.78 percent, down from 2.80 percent, and the 1-year ARM was declined from 2.66 percent to 2.63 percent.

The Ben Bernanke Factor

In comments accompanying the Freddie Mac report, Frank Nothaft, the GSE’s vice president and chief economist, noted that the likely reason for the fall in rates was recent comments by the Federal Reserve monetary policy, which said in July 31/August 1 meetings that with slowing economic activity, additional stimulus may be needed. Such is the impact of the Fed – mere discussions can sway the market.

And today, in fact, will be an important test for just how much impact the Fed can have. The markets were all over the place yesterday in anticipation of a speech Fed Chairman Ben Bernanke is giving right now at the influential Jackson Hole Economic Symposium, and there is no clear idea on what the economic maestro say in the form of new policy – or how it will affect interest rates and the Market Composite Index. Stay tuned!

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