Freddie Mac reported 30-year fixed mortgage rates rose three basis points to 4.55% with an average 0.8 point for the week ending July 28. 

While the no-point rate is historically attractive at 4.75%, it still remains too high for borrowers underlying the 4.5% coupon to become actively engaged in refinancing. 

As reported yesterday by the Mortgage Bankers Association, an uptick in mortgage rates led to a 5.5% decline in the Refinace Index to ~2583 for the week ending July 22.

In July, the 30-year fixed mortgage rate averaged 4.55% compared to 4.51% in June. 

The slight increase in mortgage rate levels have led to a 3.5% decline in refinancings over the first three weeks of July. The slowing, however, will be more than offset by a jump in the number of collection days to 23 from 21 in July and contribute to speeds increasing less than 10% from July's estimates.

Speeds are expected to peak in August at well below 2010's peaks, however. Looking at FNMA 4.5% and 5% 2008-2010 vintages, speeds are expected to prepay between 50% and 70% at last November's highs. 

For speeds to get closer to 2010's levels would require a substantial decline in mortgage rates that challenge their previous lows, Deutsche Bank Securities analysts said. 

But as Wells Fargo analysts pointed out, "each subsequent lower low in the 30-year mortgage rate has resulted in a lower high in the refinance index." As a result, they "believe that the MBS market may be in for a secular slowdown in MBS prepayment rates."

The increase is expected to reverse in September as the number of collection days falls back to 21.

Freddie Mac also reported 15-year fixed mortgage rates were unchanged at 3.66%, while 5/1 hybrid ARM and one-year ARM rates slipped two basis points to 3.25% and 2.95%, respectively.

Spreads between 30-year fixed and ARMs have widened in the past couple of weeks to 160 basis for one-year ARMs and 130 basis points for 5/1 hybrids.

This compares to 170 basis points and 130 basis points maximum spreads for this year and an average of 157 basis points and 117 basis points.

This has contributed to an increase in ARM share as a percent of total applications in the past two weeks from 5.5% as of July 8 to 5.8% for the week ending July 15 and to 6.1% in the week ending July 22.

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.