Winding down

After reaching unprecedented levels, US prepayment speeds are now slowing, matched by those in Europe. With a dramatic fall on the cards, forecasters are likely to be busy. Hardeep Dhillon reports

Prepayments on US agency mortgage-backed securities (MBS) increased in October, but the overriding trend this year has been a steady slowdown. This reflects a continuing softening of the housing market and further tightening of underwriting standards prompted by the deterioration in the subprime mortgage market.

"The overwhelming driver of the drop in prepayments of prime current coupon and discount mortgages is the decrease in existing home sales, which translates into a 30% decrease in the rate

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