Freddie Mac reported new record lows along 30- and 15-year fixed mortgage rates as well as 5/1 hybrid ARMs for the week ending July 19. Both 30- and 15-year rates declined three basis points to 3.53% (no -point rate at 3.71%) and 2.83%, respectively. Meanwhile, 5/1 hybrids fell five basis points to a 2.69% average which matches this week's one-year ARM rate.

The drop to 3.56% in the week ending July 13 boosted the Mortgage Bankers Association's Refinance Index by 22% to ~5330, which is just under the mid-June high since April 2009 of 5386. Current rate levels should keep the Refinance Index elevated in next week's release though it seems likely activity will slip lower. After hitting 5386 in the week ending June 15, refinancing activity declined steadily to 4369 through July 6 even as mortgage rates fell further to 3.62%.

Prepayment speeds are expected to increase in July and August in response to the pickup in refi activity due to the historical lows in mortgage rates. Within 30-year conventionals, speeds on 2010 and 2011 3.5s and 4.0s are projected to surge between 25% and 35% in July and by another 10% in August with CPRs reaching 26-28 from 18-21 in June.

Meanwhile, the HARP-eligible 5.5s through 6.5s are seen rising 1-2% in July and by 4-5% in August. Contributing to the percentage increase in August is a higher number of collection days at 23 from 21 in July.

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.