The Mortgage Bankers Association (MBA) Refi Index dipped to 1775.5 for the week ending Dec.5, a 16% decline versus the prior week’s holiday-adjusted level of 2100.

Citigroup Global Markets said that the drop was most likely related to the rise in weekly average mortgage rates. Analysts also attributed the dip to the official start of the holiday season, combined with the ill weather in the Northeast.

"This week’s decline in the index was somewhat stronger than we expected and may accentuate an expected decline in January speeds," wrote analysts.

Assuming application activity will stay around the past week’s level (holiday-adjusted), Citi will lower its aggregate projection for the January prepayment report by 1.5% CPR. Citi currently predicts a 15% slowdown in January speeds, which would follow a 5% to 10% pickup in December.

Meanwhile, the MBA Purchase Index declined by about 10% week-over-week (seasonally adjusted). The MBA Total Market Index dropped approximately 12% (seasonally adjusted).

Despite the rate rally at the end of the last week, weekly average rates rose by about 15 basis points for the five day period. Citi said that mortgage rates have been "zigzagging" within a narrow band of 30 to 40 basis points since the beginning of September. Rates are currently in the middle of this range.

As of yesterday, primary mortgage rates were between 5.75% and 6.25%, based on Citi’s survey of lenders’ web sites. Analysts predict the Freddie Mac Survey Rate, which comes out tomorrow, will show a decline to roughly 5.85%.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.