Prepay Commentary

October MBS Prepayment Speeds



Almost without exception, MBS prepayments accelerated slightly in October. It seems counter intuitive given seasonal, financial, and economic headwinds including higher mortgage rates and lower purchase activity. We wrote last month referring to October, “The business calendar provides three extra days of potential mortgage closings for next month’s prepayment speeds. While this day count and other technical factors should offset much of the monthly impact of higher mortgage rates, the long term gradual trend toward slower prepayment speeds should remain intact for the coming months barring a meaningful turnaround in mortgage rate trends.” It appears three extra business days were perhaps enough to help increase speeds month-over month but the trend is still certainly downward. November and December both have 20 business days (2 fewer than October) so it will be interesting to see what happens if the mortgage landscape stays relatively the same.

For the year, based on the Freddie Mac Primary Mortgage Market Survey, 30yr Fixed Rate Mortgage rates are up 88bps from 3.95 to 4.83. 15yr Fixed Rate Mortgage rates are up 85bps from 3.38 to 4.23. For perspective, on a mortgage balance of $250,000 this increase represents additional monthly payments of $128 and $105, respectively.







FNMA Speeds by Vintage Year

FGLMC Speeds by Vintage Year

GNMA Speeds by Vintage Year

Non-Generic Collateral Comparison Tables



Kevin Smith, CFA

SVP, Director Investment Product Strategies

Vining Sparks


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