Mortgage application activity declined 9.5% in the week ending Feb. 11, according to the Mortgage Bankers Association (MBA). 

"Mortgage rates remained above 5% last week, up almost a full percentage point from their October lows, and refinance volume continued to drop," said Michael Fratantoni, MBA vice president of research and economics. "Applications for home purchases also declined on a seasonally adjusted basis.  Buyers have not returned to the market as rising rates have reduced affordability, to some extent."

The Refinance Index fell 11.4% to ~1849, its lowest level since July 2009. As a percent of total application activity, refinancing declined for the fourth straight week to 64.0% from 66.6% in the previous week which is at its lowest level since last May 2010. The Purchase Index was down 5.9% to 175.3.

The decline in activity will keep prepayments muted. At this time, speeds in March (reported in April) are anticipated to be slightly higher, primarily as the day count jumps to 23 from 19 in February, while April is seen flat to modestly slower with day count dropping to 20. 

Consensus has 2008 and 2009 vintage 4.5s prepaying at 9 and 16 CPR by April (reported in May), compared to 13 and 28 in January. Similar vintage 5s are expected at 13 and 23 CPR, down from 18 and 32.

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