Short Term CPR Predictions for Agency MBS: March 2023

Infima predicts March prepayment speeds for 30-year UMBS pools to increase by about 20%. Having four more days than February, March also benefits from the vibrancy of the spring housing market. Meanwhile, with mortgage rates bouncing back toward 7%, the enthusiasm for both purchasing and refinancing might have been suppressed. 

Overall, most cohorts with 4% or lower coupon rates are expected to speed up. For instance, 2021 1.5% through 3% and 2020 3.5% are projected to pick up between 25% and 30% in prepayment speed. In absolute CPR terms, those translate to between 0.6 to 1.2 CPR increase. 

Moderately seasoned 3.5% and 4% are also forecasted to rise in speed by more than 15%. Those cohorts include 2016 through 2019 3.5% and 2015 through 2019 4%. Still, with higher coupon rate cohorts, one can see a minute slowdown. That is, the latest cohorts of 2022 4.5% through 5.5% may slow down by about 2% to 4%, potentially due to home price correction across some areas.