Mortgage rates are at new year-to-date lows in response to the sharp decline in yields following weaker than expected economic news and ongoing worries regarding EU debt.

For the week ending June 9, Freddie Mac reported 30-year fixed mortgage rates declined six basis points to 4.49% with an average 0.7 point.  This places the no point rate at 4.67%.

While prepayment risk is increasing, analysts say that mortgage rate levels need to move closer to 4% in order for the Refi Index and prepayment speeds to increase to the peak levels experienced in late summer and into the fall. 

UBS points out that as a result of previous refis, the WAC of the MBS universe has declined to 5.51% from 5.68%, so lower mortgage rate levels are needed to produce peak speed levels seen in 2010.  They added that a 4.0% primary rate will likely mean a current coupon yield of 3.10% which is well below where it is currently: ~3.80% area.

15-year fixed mortgage rates also were down six basis points to 3.68%, while adjustable rate mortgages recorded double digit declines. 5/1 hybrid ARMs averaged 3.28% versus 3.41% in last week, while one-year ARM recorded plunged 18 basis points to a new record low of 2.95%.

Yesterday, the Mortgage Bankers Association reported the Refi Index rose just 1.3% to ~2476 which included just a 1/2-day adjustment for the Memorial Day holiday.  Using a full day adjustment would have placed the index at 2800, said Credit Suisse which would have been a nearly 15% increase in activity.  Still, even that is a good way from the peak levels in 2010 of 4000-5000 in late summer/early fall.

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.