Refinancing activity fell last week in response to higher mortgage rates. The Mortgage Bankers Association said the average contract rate for 30-year fixed rate mortgages jumped 32 basis points to 5.57%. In response, the Refinance Index declined 11.8% to 2605.7, while the refinancing share dropped to 59.4% of total applications from 62.4%. This is the lowest level for both since the latter part of November.
The decline in refinancing activity in the past several weeks has downgraded prepayment outlooks with speeds projected to drop around 10% in July (reported in August) for FNMAs and nearly 30% in August.
The latest outlook suggest speeds peaking at between 20 CPR (6.5s) and 35 CPR (5.5s) in June (reported in July) for these vintages.
For the June prepaymentreport, speeds are projected to increase close to 10% on FNMAs with increases generally uniform across 5s through 6.5s and among 2008-2006 vintages. GNMA speeds are predicted to be flat with slowing in 5s and 5.5s offsetting increases in 6s and higher. Paydowns are estimated at $125 billion from $117 billion in May.
Meanwhile, the Purchase Index was up 1.1% to 270.7 as homebuyers respond to record high affordability, along with the $8,000 first time tax credit.