Mortgage prepayment speeds fell to a 19-year trough despite recent interest rate declines, but could rise if those lower rates lead to an increase in home purchases, according to Black Knight.
The monthly prepayment rate plummeted 25.2% year-over-year in January to 0.59%, the lowest this share has been since November 2000.
On a monthly basis, the prepayment rate fell 10.2% from December. But housing turnover, which is currently the primary driver of mortgage prepayments, typically bottoms out in January and February, so this narrative may shift should rates hold steady during the spring home buying season, according to Black Knight.
While recent rate declines did create more refinance incentive, though any growth there was outpaced by slipping home sales. That cancelled out any effect refis would normally have on prepayment speeds.
Consumers continued to show improved borrowing habits in January, as the nation’s overall delinquency rate dropped nearly 13% from a year ago and 3.5% from the previous month. Foreclosures are also falling off the grid.
Though they did grow 8.4% from December, total foreclosure starts tanked 19.4% from the same period a year ago. The number of mortgages in active foreclosure totaled 265,000 in January, which is down by 72,000 foreclosures from January 2018.
The total foreclosure presale inventory rate sank 22.4% from the start of last year and 2.2% from December to 0.51%. Foreclosure sales did rise over these same time periods; as a percentage of loans 90 or more days delinquent, foreclosure sales increased 10.8% on an annual basis and shot up 40.4% month-over-month in January.