The recent sell-off pushed mortgage rates higher by seven to eight basis points for the week ending Aug. 25.

According to Freddie Mac's survey, 30-year fixed mortgage rates averaged 4.22% with an average 0.7 point, up from a record low of 4.15%.

The backup in rates is expected to have led to further slowing in refinancing activity this week.

Credit Suisse analysts expect the Mortgage Bankers Association's (MBA) Conventional Refinance Index will decline around 200 points to around 4000 in the next report. This would suggest the overall Refinance Index could decline to near 3700.

Yesterday, the MBA reported that the Refinance Index slipped 1.7% to ~3850 in response to an increase in rates and remains well below last year's peak of above 5000.

Freddie Mac also reported 15-year fixed rates rose eight basis points to 3.44%, while one-year ARMs were up seven basis points to 2.93%. Only 5/1 hybrid ARMs were lower by one basis point to a new record low of 3.07%.

The pickup in refinancings from the sharply lower rates will start showing up in the September and October reports (released respectively in October and November) with a predicted average increase of less than 10% in each month with peaks projected in October/November. 

At this time, speeds on 2010, 2009, and 2008 vintage FN 4.5s are projected at 20, 27 and 35 CPR, up between 150% and 94% from July's levels. Similar vintage 5% coupons are expected to prepay at 19, 25 and 33 CPR by October, between 90% and 43% higher from July.

Speeds on 2010 and 2009 vintage 4.5s look to match the highs of 2010 as the underlying borrowers get their first real opportunity to refinance, while 2008 are seen prepaying at 75% of its high of last year. The 2010 5s are expected to prepay slightly faster, while 2009 and 2008 are called at between 87% and 76% of its 2010 peak.

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