Capacity constraints at mortgage lenders have dampened the number of refinancings that are able to get through the system. Current origination capacity at these firms can handle a refinancing index at only the 5000 level, Barclays Capital analysts said in a recent report.

Indeed, this seems to be the case. After hitting a record high for the year of 5085 in the week ending Aug. 27 when mortgage rates fell to a record low of 4.32%, the Mortgage Bankers Association (MBA) Refinance Index steadily declined for the next five weeks to 4181. The index surged back to 5060 in the week ending Oct. 8 in response to a new record low of 4.19%, but dropped more than 11% the following week.

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