The Mortgage Bankers Associ-ation (MBA) reported that for the week ending March 26, the Refinancing Index dropped 2.6% to 4857.6 versus 4988.7 the prior week. The drop reflects the rise in mortgage rates week over week.

The marginal drop in the index is not surprising considering that rates were mostly unchanged over the week. A backup two Fridays ago was unlikely reflected in last week's Refi Index results, said Merrill Lynch. However, Merrill believes the backup in rates will cause the index to decline from the high levels seen over the past three weeks. Using a methodology that analyzes the Refi Index in terms of the Freddie Mac survey rate and the average Index WAC (weighted average coupon), analysts estimate this week to fall between 3700 and 4000. With some borrowers already in refinancing mode, the index might end up close to the higher end of this range. But Merrill expects the Refi Index to settle in the mid- to high 3000s if rates stay at current levels.

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