mortgage prepayment activity fell 191 just from march to april and 618 from a year ago according to research from mortgage data and analytics company black knight why is prepayment activity down so drastically it’s driven in large part by mortgage rates rising and by how much refinancing activity has fallen as those rates have spiked says greg mcbride chief financial analyst at bankrate while rates on on 30year fixedrate mortgages hovered around 3 in 2021 they are now above 5 with some pros saying they will go higher you can see the lowest mortgage rates you can qualify for here “higher mortgage rates are likely the culprit for the steep dropoff as mortgage rates have crossed the 5 threshold many homeowners lost a key incentive to refinance” says kate wood home expert at nerdwallet some part of this may also have to do with inflation which now sits at a 40year high “since the start of the year inflation has increased significantly and as a result many households likely have less cash that they can allocate toward nonnecessities like putting extra money toward their mortgage payment” says jacob channel lendingtree’s senior economic analyst making payments earlier than required helps borrowers save on interest that’s taxdeductible and paying off the loan sooner means increasing the amount of equity in one’s home but some mortgage companies slap borrowers with prepayment penalties what’s more plenty of people got a mortgage or refinance under superlow interest rates which means they have such low mortgage rates that they’re better off putting their cash toward higherinterest debts but it’s also key to note that this isn’t the first time prepayment activity has fallen sharply what does this mean for home buyers and sellers ultimately as long as buyers are able to keep up with their regular monthly payments fewer people making extra mortgage payments probably isn’t going to have a massive impact on the broader housing market explains channel “with prices and rates as high as they are some buyers may have to settle for not being able to pay extra on mortgage even if they’d prefer being able to pay off their loan ahead of schedule” says channel falling prepayment activity could also be indicative of less cash among new buyers says channel so some sellers may find that their home sits on the market for slightly longer or attract fewer wouldbe buyers than what would have been common in much of 2020 or 2021 says channel “that said there’s still plenty of demand for homes among buyers so sellers shouldn’t worry too much” he adds and there may be an upside to home buyers and sellers in all this mcbride says lenders aren’t inundated with refinancing applications so the mortgage process may go a bit more quickly assuming the lender is sufficiently staffed