Freddie Mac reported 30-year mortgage rates held unchanged at a record low 3.66% for the week ending June 29.

Refinance activity is not likely to be responsive as rates set or have held successive record lows for eight of the last nine weeks. This is demonstrated by the Mortgage Bankers Association's (MBA) Conventional Refinance Index, which slipped 2.8% for the week ending June 22 to 4586 after a nearly 16% decline in the prior week.

The overall Refinance Index declined 8% last week to 4938 as government refinancings moved off its record high 8872 to a still high 6786. The Government Refinance Index will be the main focus again in next week's MBA release in order to gauge prepayments particularly in August.

Credit Suisse suggested that if the index drops to 3000, August prepayments on mortgage insurance premium reduction-eligible GNMA cohorts should be similar to the July increases. If it remains elevated in coming weeks, "it will imply even higher August speeds on these cohorts."

For the month of June, 30-year fixed mortgage rates averaged 3.68% compared to 3.80% in May. Outside of GNMAs, speeds on 15-year FNMAs and 30-year conventional MBS are predicted to increase around 5% on average in June and again in July. 3.5% and moderately seasoned 4.0% and 4.5% coupons will see the largest percentage gains at 10-20+% as the underlying credit-eligible borrowers responded to the successive lows in mortgage rates.

Speeds on the higher coupon HARP candidates are predicted to see further strengthening in June at +3-4%.

Meanwhile in GNMAs, some firms already have made upward revisions to their July prepayment outlook, which will be reported in August. Prior to last week's MBA report, GNMA I speeds were expected to increase by 10% on average for 3.5% through 5.5% coupons, but now it is estimated at 15%. In particular 2009 and 2008 vintages have been raised by around 2-3 CPR for 4.5s through 6.0s.

While speeds in July have been revised up to reflect the surge in application activity, August has likewise been revised lower to a 6% increase from a previous estimate of 9% as refinance demand is seen being pulled forward.

In other mortgage rates news, 15-year fixed rates set a new low at 2.94%, one basis point lower from last week; 5/1 hybrid ARMs increased two basis points to 2.79%, while one-year ARM rates were steady at 2.74%.

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