Prepay Analysis: January 2026

OBSERVATION: Speeds were mixed once again this month; conventional fixed and jumbos decreased, while governments rose. We seem to be in wobble mode, with a bit of an upward bias. Mortgage rates were down a bit across the board.

The average coupon of all loans outstanding in this database ($5.8T) is 4.28%, and 83% of all mortgages have coupons under 6.00%. However, four dynamics have appeared:

1. Some borrowers are tiring of hanging on to their low-rate mortgages and are succumbing to demographic pressures (new home, job transfer, etc.) to refi
2. Cash-out refis seem to be growing in popularity, with approximately 11% of all new loans falling into this category
3. One-sixth of the outstanding loans are now close to or “in the money” (i.e., >= 6.0%)
4. Rates are low relative to the last year

The wild card now is whether the Fed’s easing will continue and, if so, what impact that will have on longer-term rates (i.e., mortgages).

Additionally, the data indicate that mortgagors with coupons < 3.0% are not succumbing to demographic pressures and refinancing into higher-cost mortgages. In 2023, 34% of borrowers had mortgages < 3.0%; that percentage is still 34% today. These borrowers are holding onto their once-in-a-lifetime rates and are not letting go. This has not changed over the last several months.

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