Mortgages Prepaid At Record Rates in April

May 7, 2003 ( - Pension plans struggling with prolonged lower rates of return have a new issue to contend with: April's record high for prepayments on US mortgage bonds.

P repayment speeds on many coupon issues increased anywhere from 15% to 107% during April from March’s levels as homeowners continued to reap the rewards of low interest rates, according to a Reuters report.

While homeowners see benefits through refinancings, investments in these bonds feel the pinch.   Fast payback on the home loans that support mortgage bonds mean that retirement accounts lose out on the expected interest income on their mortgage bond holdings. Therefore, many institutional investors are forced to look for other comparable fixed-income investments that often bear lower yields.