With the October prepayment reports due to be released Thursday, Street consensus estimates are that speeds will decline 12% to 15% in September.

Specifically, Credit Suisse First Boston analysts are expecting speeds to generally drop 8% to 15% versus August, adding that smaller dips are anticipated on the 2005 vintage compared to more seasoned counterparts. These expectations are based on mortgage application volumes from Aug. 10 to Sept. 9.

The factors impacting speeds include the decline in business days to 21 from 23 as well as increasing mortgage rates. Freddie Mac reported that the 30-year fixed rate averaged 5.82% in August versus 5.70% in July.

Not surprisingly, the increase in mortgage rates has similarly impacted refinancing activity. In August, the Refinance Index averaged 2264, down from 2436 in July. Paydowns are estimated to total $53 billion, according to Merrill Lynch, down from $61 billion in August.

Further out, October prepayments are generally expected to slow in the 5% area, attributed to a decrease in day count to 20 from 21 as well as seasonal factors. According to CSFB, refinancing volume should be flat with the expected slight decline in 30- and 15-year mortgage rates. Further declines are also expected for November's report.

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