The Mortgage Bankers Association (MBA) reported Wednesday that the seasonaly-adjusted Refi Index increased 2.5% to 1640.5 from 1600.3 the previous week, but did not reflect last Friday's employment number induced rally. Researchers at JPMorgan Securities report that the seasonally adjusted Refinancing Index will likely increase to a 2300 to 2500 level next week. Meanwhile, the adjusted Purchase Index decreased by 2.7%. The overall ARM share of applications (by dollar volume), including jumbos and conventionals, topped 48%, flat from the previous week.
In terms of future prepayments, JPMorgan expects the Index to be 15% higher by September. The bulk of the increases should be in 30-year 5.5s and 6s. Analysts also predict 2003 vintage 5s to remain well over 10% CPR in August and September. Researchers have updated their September projections to reflect a no-point 30-year mortgage rate of 5.875%. At this rate, prepayments could increase 25% at the cusp, analysts added. Meanwhile, JPMorgan expects 2003 5.5s to reach roughly 20% CPR and 2002 6s to hit 35% CPR. The agency fixed-rate paydown projections are $60 billion for next month and $72 billion following that.