The Mortgage Bankers Association (MBA) reported that its Refinance Index plunged 16.5% to ~3831 for the week ending Nov.12. This is the lowest the index has been since early July.

As a percent of total applications, the refinancing share declined to 80.3% from 81.7% previously. Purchase activity was also lower, declining 5% to 179.

The activity drop was related to a surge in mortgage rates with the average contract interest rate on 30-year fixed rate mortgages at 4.46% from 4.28% with points increasing to 1.13% from 1.04% for an 80% LTV loan. This is the highest the rate has been since early September, the MBA said.

"Rates increased sharply last week due to stronger economic data and lingering uncertainty regarding the structure and impact of the Fed's QE2 program," said Michael Fratantoni, MBA's vice president of research and economics. "Mortgage applications, particularly for refinances, dropped in response."

Looking out to December and January prepayment outlooks (reported in January and February) where this activity will show, speeds are expected to increase about 5% in December from November's estimate with the day count increasing to 21 from 20 factoring in. Speeds are seen declining in January with one less collection day.

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