MSR Volatility Returns: Rates, Oil, and Prepay Pressure

Markets don’t move in straight lines, and neither do MSR values.

MSR values on newly originated loans whipsawed a bit. Mortgage rates spiked in March, given the perceived inflationary impact of the Iran war. As of today, this seems to have reversed itself with the opening of the Strait of Hormuz. Oil prices are down to $84/barrel, and the 10-year is down to 4.25%. Mortgage rates have already dropped 25 basis points from month-end, implying higher prepayment speeds and, thus, lower MSR values. I suspect this whipsaw will hold for month-end MSR valuations as well.

Stay Ahead of the Market with Level1Analytics

Staying ahead in this environment requires clarity, speed, and adaptability, exactly what we aim to deliver with every valuation. At Level1Analytics®, we track market dynamics in real-time to help institutions make informed portfolio decisions. Interested in learning more?