Mortgage rates jumped for the fifth straight week as Treasurys have backed up sharply following President Obama's proposal last week to lower tax rates, as well as in response to stronger-than- expected economic news recently. 

According to Freddie Mac's weekly survey, the 30-year fixed mortgage rate surged 22 basis points to 4.83% with an average 0.7 point. This places the no-point rate above 5%.  Rates are at their highest level since mid-May.

The 15-year fixed mortgage rates increased 21 basis points to 4.17%, 5/1 hybrid ARMs averaged 3.77% compared with 3.60% last week, and one-year ARM rates rose eight basis points to 3.35%.

As indicated by the Mortgage Bankers Association's Refinance Index, higher mortgage rates have pushed refinancing activity lower as fewer borrowers have an incentive to refinance. Since mortgage rates hit record lows in early November, the Refinance Index has plunged 36.5% to ~2911 as of the week ending Dec. 10.

According to FTN Financial, the percentage of the agency mortgage market that is fully refinanceable has declined to around 49% from around 67% in early November. This translates to $1.2 trillion in agency MBS that is less refinanceable compared to a month ago, analysts calculated.

If current rate levels hold, analysts estimated that speeds on 4.5s will decline by 10 to 15 CPR over the next month or so, while 5s will slow in the 5-10 CPR area.

Speeds on 2009 and 2008 4.5s are  currently declining to 17 and 33 CPR, respectively. By the February report (released in March), a drop is expected from 27 and 48 CPR that was reported in November.

Similar vintage 5s are seen slowing to 22 and 32 from 29 and 44.  Also contributing to the slowing speeds in February is a lower day count of 19, along with traditional slowing related to the winter months.

FTN added that, "the current prepayment landscape is highly cuspy at this juncture. Very small changes in primary rates will have a very large impact on the prepayment profile of the MBS market going forward."

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