A Credit Suisse report shows the rate of 30-year conventional prepayments dropped 10% in the latest month and Ginnie Mae I and II 30-years slowed by a slightly greater extent as higher rates have begun putting the brakes on speeds.
The Ginnie I and II speeds in the 30-year sector were 13% and 12% slower than
According to the report, some HARP speeds for “core” 2006-2008 vintages with coupons in the 5% to 6.5% range slowed by 5% but there were some differences in trends between Fannie Mae and Freddie Mac by seller. Some differences stemmed from servicing transfers. Low-loan-balance pool trends also diverged.
“Fifteen-year speeds exhibited similar trends as 30-year counterparts with speeds generally in line with projections,” Credit Suisse’s researchers added, noting there were some exceptions such as 2.5s that slowed beyond expectations.
Barclays in its prepayment report is forecasting “sharply lower” speeds in the July and August prepayment reports “where a cumulative 100 basis point increase in mortgage rates will likely force speeds sharply lower.”
“For the first time in years, the market will be moving away from a refi-driven mentality,” Barclays noted.
Prepayment analysis has historically shifted toward housing turnover indicators such as home price appreciation as a result, but Barclays noted that “the historical relationship between HPA and turnover may not fully hold, particularly in the context of exiting the worst housing crisis in U.S. history.
“Credit underwriting conditions, for instance, remain at historically tight levels relative to other discount periods. The lock-in effect (i.e., borrowers who locked in historically low mortgage rates do not want to give them up) is likely to restrain mobility further, particularly for lower coupons.”
