In the September 16 week, an increase in mortgage rates halted the recent modest rise in applications for new mortgages and larger wave of refinancing activity. Potential homebuyers remain sensitive to even small changes in rates as they seek to maximize the affordability of a purchase. Current mortgage holders with higher rates whether fixed or adjustable rate are quick to lock in a better rate when the opportunity comes around, but go dormant as soon as rates rise again.

The MBA mortgage applications index is 12.7 percent lower in the September 26 week. It is 24.4 percent higher than four weeks ago and 16.0 percent higher than a year earlier. The purchase index is 1.0 percent lower in the current week and 8.8 percent higher than four weeks ago and 15.7 percent higher than a year earlier. The refinancing index is 20.6 percent lower and is 41.7 percent higher than four weeks ago and 16.3 percent higher than a year earlier. In the September 26 week, refinancing accounted for 55.0 percent of mortgage applications compared to 60.2 percent in the prior week.

The fixed-rate mortgage index is 12.2 percent lower in the September 26 week. It is 25.0 percent higher than four weeks ago and 12.8 percent higher than this week last year. The adjustable-rate mortgage index is 17.5 percent lower and is 18.7 percent higher than four weeks ago and 68.7 percent higher than a year ago.

The contract rate for a 30-year fixed-rate mortgage is 6.46 percent in the current week. This is 12 basis points higher than the prior week, 18 basis points lower than four weeks ago, and 32 basis points higher than a year earlier. The contract rate for a 5-year adjustable-rate mortgage is 5.74 percent in the week. This is 21 basis points higher than the prior week, 16 basis points lower than four weeks ago, and 13 basis points lower than a year earlier. In the September 26 week, adjustable-rate mortgages accounted for 8.4 percent of mortgage applications compared to 8.9 percent in the prior week.

The Mortgage Bankers' Association compiles various mortgage loan indexes. The purchase applications index measures applications at mortgage lenders. This is a leading indicator for single-family home sales and housing construction.

This provides a gauge of not only the demand for housing, but economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the Mortgage Bankers Association purchase applications, investors can gain specific investment ideas as well as broad guidance for managing a portfolio.

Each time the construction of a new home begins, it translates to more construction jobs, and income which will be pumped back into the economy. Once a home is sold, it generates revenues for the home builder and the realtor. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items new home buyers might purchase. The economic"ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month.

Since the economic backdrop is the most pervasive influence on financial markets, housing construction has a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the MBA purchase applications index carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.