What Is the MBA Refinance Index?

The MBA Refinance Index is a weekly measurement put together by the Mortgage Bankers Association, a national real estate finance industry association. The index helps to predict mortgage activity and loan prepayments based on the number of mortgage refinance applications submitted.

The MBA Refinance Index measures the number of refinance applications submitted and is reported every Wednesday. However, it does not measure the number of refinance loans that are actually closed. The MBA Refinance Index reports the new weekly index number and the percentage change from the previous week’s number, as well as the index’s four-week moving average.

MBA Refinance Index Explained

The MBA Refinance Index is a tool to predict mortgage activity. Home builders pay attention to the MBA Refinance Index because it is the leading indicator of home sales. Mortgage investors also take notice of the index as it is a leading indicator of mortgage prepayment activity.

Economists follow the refinance index because an increase in refinancing when interest rates are decreasing can give consumers more money to spend in other areas, which can then benefit the overall economy. Various factors impact the index, but most importantly mortgage interest rates, 10-year bond rates and home prices.

When the refinance index indicates an increase in refinance activity, it can be bad news for investors of mortgage-backed securities. Homeowners who refinance are prepaying their original mortgages. Mortgage investors then lose the mortgage that is at a higher interest rate and see it replaced by mortgages that incur a lower interest payment.

Key Takeaways

  • The MBA Refinance Index is a tool to predict mortgage activity.
  • The index helps to predict mortgage activity and loan prepayments based on the number of mortgage refinance applications submitted.
  • Home builders pay attention to the MBA Refinance Index because it is the leading indicator of home sales.

The Mortgage Bankers Association and the MBA Purchase Index

The MBA also releases the MBA Purchase Index, which measures home loan applications for buying rather than for refinancing. Unlike the purchase index, the refinance index is not seasonally adjusted because seasonality does not affect refinance activity the way it affects purchase activity. The MBA Refinance Index, along with the MBA Purchase Index, make up the market composite index which has been conducted since 1990 by the MBA.

The national association representing the real estate finance industry, the Mortgage Bankers Association or the MBA published both indexes. The organization is headquartered in Washington and works to help their members conduct the business of single and multifamily mortgage finance by promoting fair and ethical lending practices, fostering professional excellence through educational programs and publications, providing news and information, and holding conferences.

Not the be confused with a mortgage broker, a mortgage banker is an institution or individual who closes and funds mortgage loans in their own name. A mortgage broker facilitates a mortgage transaction between a mortgage banker and a borrower for a fee. The MBA represents mortgage bankers.