As prepayment rates on home mortgages have fallen to
Perhaps most striking is how much the rise in rates in the past year or so reduced refinances.
Speeds on refis fell to a more than 20-year low in January, according to the report, in which the company conducts further analysis of numbers in its earlier
No-cash-out refis contributed just 1.52 basis points to the single-month mortality rate for home mortgages. That compared to default, 1.73; cash-out refi, 4.99; curtailment, 7.41, and home sales 17.16.
And even home sales were muted during the typically slow month, when they dropped to a seven-year low on a seasonally adjusted basis due to affordability strains.
Interestingly curtailments, or small additional principal payments, "accounted for a larger share and volume of prepayment activity than refinances for the second consecutive month, something we've never seen before," Black Knight noted in its report.
The shift in drivers is in line with data from the company showing around half of financed houses with mortgages have low rates at or below 3.5%, making it unlikely they'll refinance in a market where
Although this means the influence of refis has diminished for the outstanding universe of loans, prepayment forecasters will still be watching them closely given the fact that more recent originations could be subject to higher speeds when current financing costs experience near-term dips.
"The fact that curtailments make up a larger share of prepayments is more indicative of the lack of prepay activity elsewhere than anything else, said Gunnar Blix, director of housing market research, in an email. "The bigger challenge in prepayment modeling right now is understanding what will happen to the newest vintages of mortgages (since these have higher coupon rates) if rates should drop, and determining what the most realistic scenarios for rates will be going forward."
