Prepay Analysis: August 2025

OBSERVATION: Normalcy seems to have returned to prepay speeds. Speeds continue to bounce within a fairly narrow band: conventional fixed-rate and jumbo speeds remain near their demographic lows, while governments and ARMs maintain their historical tendency to be generally faster than conventionals. The average coupon of all loans outstanding in this database ($5.7T) is 4.18%, and 84% of all mortgages have coupons under 6.00%.

However, three dynamics are beginning to appear:

1. Some borrowers are tiring of holding on to their low-rate mortgages and are succumbing to demographic pressures (new home, job transfer, etc.) to refinance.
2. Cash-out refis seem to be growing in popularity, with approximately 10% of all new loans falling into this category.
3. One-eighth of the outstanding loans are now close to or “in the money” (i.e., ≥ 6.50%).

The wild card now is whether the Fed will lower short-term rates in September and, if so, what impact that will have on longer-term rates (i.e., mortgages).

Stay Ahead of the Market: At Level1Analytics®, we track these dynamics in real-time to help institutions make smarter MSR and whole-loan portfolio decisions. Want to know what this means for your book?

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