It was essentially "status quo" in terms of the mortgage rates in the week ending July 21.

Freddie Mac reported 30- and 15-year fixed mortgage rates increased just one basis point from last week to 4.52% and 3.66%, respectively.

Meanwhile, five-year hybrid and one-year ARMs were mixed at lower and higher two basis points with the former averaging 3.27% and the latter 2.97%. Rate levels for all are within two to five basis points of their year-to-date lows.

Refinancing activity is unlikely to be stimulated by this latest report given the continued tight underwriting environment, poor home valuations, conservative appraisals, mortgage banker constraints and the uncertain economic and employment outlook. 

The reduction in the conforming loan limits on Oct.1, however, may contribute to a pickup as those borrowers who would be impacted (loans above $625,500) refinance  to obtain the more favorable mortgage rates available in the agency MBS arena versus the Jumbo market. 

In fact yesterday's 23.1% jump in the Mortgage Bankers Association Refinance Index to ~2733 for the week ending July 15 was partially attributed to this. Deutsche Bank Securities analysts warned as well that prepayments on these loans could surge before the deadline.

Outside of this, a significant decline in mortgage rates to 4%, or some program from the government or recovery in the housing market/economy is the only way to cause a surge in refinancing activity.

At this time, prepayment speeds are expected to peak in August (reported in September) with the day count a significant influence at 23 days from 21 in July and helping to push speeds up nearly 10%. Speed levels, however, are expected to be well below 2010's highs. For example, 2009 and 2008 FNMA 4.5s reached 26.6 CPR and 46.4 CPR in November of last year and estimated at 16 and 23 in August.

Similar vintage 5s prepaid at 28.7 and 43.6, compared to a projected 19 and 28 CPR. The increase is anticipated to reverse in September as the number of collection days falls back to 21.

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